Skills shortage in the UK: what it means for large organisations

The UK skills shortage refers to the gap between the skills employers need and those available in the labour market. The Office for National Statistics (ONS) reported that UK vacancies stood at 707,000 for May to July 2026, down 19,000 (2.7%) from the same period a year earlier. It is worth noting that vacancy figures measure unfilled roles across the economy and are distinct from skills-shortage statistics, which specifically measure roles that are hard to fill because applicants lack the required skills, qualifications or experience. 

On that more specific measure, the Department for Education's Employer Skills Survey found that 27% of all vacancies were skill-shortage vacancies, with 6% of employers reporting at least one skill-shortage vacancy. Construction (45%), education (36%), and manufacturing (34%) recorded the highest proportions of hard-to-fill roles attributable to skills gaps. 

The UK government has taken action with the establishment of Skills England in 2024. This executive agency, under the Department for Education, is designed to enhance the flexibility of skills training, address regional economic needs, and improve the effectiveness of the Apprenticeship Levy. Collaboration between educational institutions and industry sectors matters, but Skills England's reforms will take years to filter through. Large organisations need a plan that works in the meantime. 

Several factors have converged to create the current labour shortage, and none of them is straightforward to reverse. 

Post-Brexit changes reduced the supply of EU workers who had previously filled roles across hospitality, construction, agriculture, and social care. The COVID-19 pandemic accelerated a structural shift in the types of jobs available. Millions of people lost roles that simply did not return in the same form, leaving a mismatch between the skills people have and the skills employers now need. An ageing workforce is shrinking the available talent pool in technical and specialist roles. And automation is displacing lower-skilled, routine-based jobs faster than the workforce can retrain for the roles that replace them. 

Underlying all of this is a sustained decline in employer investment in training. The Department for Education's Employer Skills Survey found that total UK training expenditure was £53 billion in 2024, down from £59 billion in 2022 (in 2024 prices) and an 18.5% decrease since 2011. Training spend per employee fell to approximately £1,700, down from £1,960 in 2022 and nearly 30% lower than in 2011. Only 59% of employers provided training for their staff in the previous 12 months, continuing a downward trend from 66% in 2017. 

As Emma Parkin, Head of Propositions at The Access Group, puts it: 

"Skills shortages persist across multiple sectors, and economic uncertainty makes hiring decisions more critical than ever. Companies are now prioritising efficiency and ROI over volume hiring, with skills-based recruitment replacing rigid qualifications." (Recruitment Under Pressure)

Skills shortages are not evenly distributed. Some sectors have been dealing with acute shortfalls for years; others are only now feeling the pressure as automation and demographic change reshape their workforces. 

Hospitality skills shortage 

The UK hospitality sector continues to grapple with a severe skills shortage, with over 132,000 vacancies according to UK Hospitality. The CIPD places staff turnover in hospitality at 52%, the highest of any UK sector, driven by a combination of high staff turnover, low pay, demanding working conditions, and a persistent perception of hospitality as a temporary or low-skilled career. Brexit and the pandemic have further depleted the talent pool, with many experienced workers leaving the industry and not returning. 

The skills most in demand span customer service, kitchen management, and supervisory and general management roles, areas where experience and soft skills matter as much as technical knowledge. 

Discover strategies to reduce turnover and retain talent in our blog on reducing turnover in large retail businesses. 

Construction skills shortage 

Construction faces one of the most acute and structurally complex skills challenges in the UK economy. The Department for Education's Employer Skills Survey found that 45% of construction vacancies were skill-shortage vacancies, the highest proportion of any sector. Skills England's Annual Skills Report 2026 forecasts that the 30 most important construction job categories will need 493,000 additional workers by 2035, a 26% increase, while 595,000 workers are expected to leave the sector through retirement and career change over the same period. 

The government has committed a £625 million Construction Skills Package to deliver up to 60,000 additional skilled construction workers, alongside a £96 million funding package to create tens of thousands of construction placements across England. From August 2026, the government will cover the full apprenticeship training costs for eligible under-25s in the sector. While this investment is significant, Skills England's own analysis makes clear that the scale of the workforce challenge runs considerably deeper than training numbers alone. 

For actionable strategies to combat skills shortages, access our guide to Navigating HR Tech Challenges. 

Manufacturing skills shortage 

Manufacturing faces a growing demand for reskilling and upskilling programmes focused on digital skills, from systems analysis and evaluation to technology design and programming. The Department for Education's Employer Skills Survey found that 34% of manufacturing vacancies were skill-shortage vacancies. In a survey of 570 HR managers, the VDMA (Germany's Mechanical Engineering Industry Association) found that 78% experienced challenges in finding candidates with engineering qualifications, while 82% struggled to find skilled workers who had completed vocational training. 

Learn more about the specific recruitment hurdles facing the sector in our blog on recruitment challenges in manufacturing. 

Engineering skills shortage 

Engineering continues to face persistent structural shortfalls. Skills England's Annual Skills Report 2026 identifies engineering as one of the sectors where priority occupations face competition from multiple industries, making it increasingly difficult to attract and retain skilled individuals. The Edge Foundation has reported that green engineering jobs saw a 55% increase in job postings over the five years to 2023, without a corresponding rise in qualified candidates, a gap that is likely to widen as demand for green skills grows across industries. 

Digital and technology skills shortage 

Securing staff with strong digital awareness, and the capacity to expand their knowledge in this area, is an increasingly important consideration for organisations across every sector. The 2024 State of the Digital Decade report found that only 55.6% of the EU's population has at least basic digital skills, and the picture in the UK is similarly concerning. 

AI is now reshaping the digital skills challenge in a new direction. According to The Open University's Business Barometer 2026, 51% of employers say AI is changing how they hire, and 19% have reduced entry-level recruitment. Of those cutting early-career roles, 42% attribute the decrease directly to wider AI adoption performing tasks that would previously have been entry-level work. Skills England's Annual Skills Report 2026 notes that AI exposure is highest among workers in professional, analytical and higher-paid occupations, and that employers increasingly value judgement, problem-solving, collaboration, digital fluency and responsible AI capabilities over routine task completion. 

Healthcare skills shortage 

Healthcare represents one of the most acute and structurally complex skills shortages in the UK. The NHS Long Term Workforce Plan estimates a shortfall of approximately 150,000 full-time equivalents (FTEs) in the NHS workforce. The Department for Education's Employer Skills Survey found that human health activities accounted for more than 15% of all UK vacancies in 2024, and one in ten of all vacancies where skills shortages were experienced. Unlike many other sectors, healthcare shortages are harder to address through reskilling alone. Training pipelines are long, regulatory requirements are strict, and the demand for qualified professionals continues to outpace supply.

While skills shortages affect organisations of all sizes, large businesses face unique challenges due to their scale, complexity, and strategic dependencies. Unfilled roles and extended time-to-hire are the visible symptoms. The costs that do not appear on a recruitment dashboard are often larger. 

The Open University's Business Barometer 2026 found that among employers experiencing skills shortages, 54% report increased workloads, 44% report lower morale, and 35% report declining staff wellbeing. A further 76% say economic uncertainty has made recruitment or training more difficult, and 43% have hired fewer staff over the past year. 

"Skills gaps are already costing the UK economy £63 billion every year. For individual organisations, it means lost productivity, missed opportunities, and competitive disadvantage. Every day your workforce lacks critical skills is a day you're falling behind." - Emma Parkin, The Access Group, Beyond Annual Reviews 

Greater operational impact

In large organisations, even a small percentage of unfilled roles can have a significant ripple effect. A 2% vacancy rate in a company with 1,000 employees means 20 roles unfilled, and the workload absorbed by those around them. 

Higher financial costs

The Open University's Business Barometer 2026 reports that 57% of UK employers face skills shortages, compared with 62% in 2024 and 73% in 2023, though these figures are not a perfectly continuous time series as the survey methodology has evolved. The associated costs, including extended recruitment cycles, agency fees, temporary cover, and lost productivity, continue to mount. 42% of employers expect their skills shortage to worsen. 

Slower adaptation to emerging technologies

Large enterprises are more likely to invest in advanced technologies like AI, automation, and green innovations. Without the right talent to implement and manage them, those investments stall. 

Strategic risk exposure

Skills shortages can impact long-term strategic goals, including expansion, innovation, and ESG commitments. Large organisations often rely on specialised roles that are harder to fill, making them more vulnerable to market disruptions and talent competition. 

Talent retention challenges

Without robust internal development pathways, retaining top talent becomes increasingly difficult, particularly when competitors are actively poaching. 

As Zoe Wilson, Director of ReThink HR, explains: 

"People are getting approached left, right and centre for roles. Headhunting is quite fierce, the competition is really fierce, but also skills shortages in all these new roles make it quite hard. So the learning and development aspect of needing to bring people on, build those skills, knowledge, and experiences within your organisations is huge. Larger organisations are looking at their own universities, their own tools to really grow their own." (DTBWOYL Ep. 1 – Mastering the Employee Lifecycle) 

The World Economic Forum's Future of Jobs Report 2025 forecasts that by 2030, 170 million new jobs will be created globally, while 92 million are expected to be displaced. At the same time, 39% of workers' existing skill sets are expected to be transformed or become outdated by 2030. Employers are already prioritising upskilling in response. 

New technological processes tend to support more highly skilled professions, automating manual tasks and increasing demand for the professionals who manage them. For lower-skilled and routine-based roles, however, automation is increasingly replacing jobs entirely, as ONS research confirms. 

It is worth noting that replacement is not the primary aim when organisations implement AI. According to the Tony Blair Institute for Global Change, adoption of AI across the public sector workforce could save around one-fifth of workforce time at a comparatively low cost, freeing people to focus on higher-value work rather than eliminating roles. Skills England's Annual Skills Report 2026 similarly notes that evidence from PWC's AI Jobs Barometer suggests AI is largely being used to support workers rather than replace them, though persistent inequities in access to relevant skills and training remain a concern. 

Productivity is where the skills shortage becomes a board-level problem, not just an HR one. Roger Clements, Managing Director at Matrix, frames it clearly: 

"The big challenge for HR in the next two to three years is all around the productivity agenda. How does an organisation help drive productivity of the workforce, and how can you use workforce management tools to measure and optimise productivity? Every organisation, large and small, is seeking a productive workforce." (DTBWOYL Ep. 5 – Managing Complex Workforces) 

The way employees access learning and development is also shifting: 

"We've moved from the era of search into the era of recommendation. Employees expect to be fed information, not go looking for it. AI can recommend training, learning, and development based on patterns. 'Someone like you did this three years ago.' It's the same principle as Spotify or YouTube." - Roger Clements, The Access Group

57% of UK employers face skills shortages, according to The Open University's Business Barometer 2026, based on a survey of 1,500 UK business leaders conducted by Opinium in April and May 2026. While this represents a modest improvement from 62% in 2024 and 73% in 2023, the impact remains substantial. Skills shortages are increasing workloads for existing staff, preventing the adoption of emerging technologies like AI and green innovations, and placing sustained pressure on organisational performance. 42% of employers expect their skills shortage to worsen. 

For large businesses with 500 or more employees, reskilling is one of the few levers that reduces recruitment dependency, improves retention, and builds capability at the same time. These organisations face complex challenges, from integrating emerging technologies to managing legacy systems and diverse workforces. By investing in targeted reskilling programmes, large firms can reduce reliance on external hiring, boost employee retention, and accelerate innovation. 

There is also a significant and largely untapped talent pool that reskilling strategies can reach. More than one million young people aged 16 to 24 are currently classed as NEET (not in education, employment or training). The Open University's Business Barometer 2026 found that 68% of NEET young people would be willing to train or upskill to improve their job prospects, and 78% would be likely to stay longer with an employer that offers training and development. The appetite to work and develop is there. The barriers are practical: 40% of NEETs identify mental health challenges as a barrier to becoming work-ready, 37% cite lack of experience, and 35% feel underqualified. 

The challenge is that investment in learning and development is moving in the wrong direction. Charissa King, Editor of HR Magazine, puts the problem plainly: 

"84% of L&D professionals have had their budgets cut. So money is an issue. But also, how do you map who has the right skills in your organisation? And how do you make learning fair across the organisation, especially if you're small or large?" (DTBWOYL Ep. 6 – L&D for Your People) 

Getting learning onto the board agenda is harder than it sounds. As Idris Arshad, Head of People, Asthma + Lung UK, notes: 

"First challenge is getting that discussion at the top table. How often do we talk about learning at the executive or board level? What does learning look like today, and what does it look like in the future? For some, learning is just a training course and a comeback. For others, it's on the job, going to a conference, learning online, speaking to a colleague. Getting that understanding across the organisation is a big challenge." (DTBWOYL Ep. 6 – L&D for Your People)

Oli Quayle, AI Evangelist at The Access Group, explains how AI is changing the economics of learning at scale: 

"Pre-AI, setting up a learning course, updating materials, and managing programmes was a massive investment. AI changes that. It can take large amounts of information, boil it down quickly, and break it into pieces. You can get bespoke training courses that are fit for purpose and easy to update. When a regulation changes, AI can automatically update the content. That's a game changer." (DTBWOYL Ep. 6 – L&D for Your People)

Our Workforce Planning Template details how you can plan out reskilling and learning to help close the skills gap.

Many large organisations are reviewing their recruitment and development strategies in light of persistent skills shortages. The Open University's Business Barometer 2026 found that 47% of employers are currently prioritising the recruitment of young people to combat skills shortages, and 80% say they are prepared to train young people entering the workforce. However, words are not always backed by action: only 43% offer work experience placements, around a third offer graduate schemes (34%) or paid internships (33%), just 34% have initiatives specifically for workers under 25, and only 11% directly target those who are NEET. 

Large businesses have the capital and infrastructure to invest in long-term skills strategies. Most do not use them as effectively as they could. 

1. Invest in training and development 

Continuous investment in workforce training is the baseline, not a differentiator. The organisations that cut it during downturns are the ones that struggle to scale when conditions improve. The Department for Education's Employer Skills Survey found that total UK training expenditure fell to £53 billion in 2024, an 18.5% decrease since 2011, with training spend per employee dropping to approximately £1,700. Only 59% of employers provided training in the previous 12 months. 

Employees are increasingly clear about what they expect from their employers in this area: 

"We're not just happy with a salary anymore. We want so much more from our employers in terms of investment in me as a professional, employee benefits that make my work-life balance easier. The flexibility, there are so many stats saying people would take less money over flexibility."  - Zoe Wilson, DTBWOYL Ep. 2 – Attracting the Best Talent 

Large organisations are better positioned to invest more capital into training and development programmes, securing a talent pipeline that reduces dependence on external recruitment. 

Learn about more strategies to build and develop your pipeline in our guide on how to build and maintain a talent pipeline in a growing business. 

2. Offer apprenticeships and vocational training 

Providing apprenticeships and vocational programmes can cultivate a skilled talent pipeline from the ground up. Skills England's remit includes improving the effectiveness of the Apprenticeship Levy. From August 2026, the government will cover the full apprenticeship training costs for eligible under-25s in construction, with recruitment incentives worth up to £3,000 for some new hires. Large employers should monitor how these reforms extend to other sectors, as changes could make it easier to direct levy funding toward the specific skills their business needs. 

The Open University's Business Barometer 2026 also highlights a structural gap worth addressing: 42% of NEET young people believe AI is threatening their future job prospects, and 49% are wary about AI impacting their careers. Apprenticeship and vocational pathways that explicitly build digital and AI literacy alongside technical skills are more likely to attract and retain this cohort. 

3. Partner with colleges and universities 

Partnering with schools, colleges, and universities can help align learning with industry needs, producing graduates equipped with relevant skills, particularly digital ones. For large organisations operating across multiple regions, these partnerships can also support local talent pipelines and strengthen community relationships. 

The most effective partnerships go beyond graduate recruitment. They involve co-designing curricula, offering placements, and providing early visibility of career pathways to students who might not otherwise consider the sector. 

4. Invest in effective workforce planning 

Proactively identifying current and future skill requirements is the difference between reacting to a skills shortage and preventing one. Establishing dedicated teams to coordinate workforce development efforts, and giving them the data they need to make decisions, is increasingly central to large-scale HR strategy. 

As Oli Quayle explains: 

"If you've got everything all in one platform, technology can support you by looking more predictively at the workforce you'll need and making sure you've got the right skills next month, next year. With AI and analytics, you can optimise step by step and make cost savings while getting better people with better skills at exactly the right time." (DTBWOYL Ep. 5 – Managing Complex Workforces) 

5. Engage with government initiatives 

Engaging with government programmes designed to address skills shortages can provide meaningful additional support. The government's £625 million Construction Skills Package, Skills England's Annual Skills Report 2026, and the broader industrial strategy all represent frameworks that large employers can engage with, particularly around regional economic needs and Apprenticeship Levy reform. 

6. Build a learning culture 

Encouraging employees to pursue continuous learning, and providing the resources and time to do so, is one of the most durable ways to build workforce resilience. Skills such as complex problem solving, negotiation, and emotional intelligence are now recognised as essential rather than supplementary, enabling organisations to upskill and reskill internal talent who already share the right values and commitment to business goals. 

Generic programmes that ignore what employees already know create disengagement rather than development: 

"If I already know 70% of a course and I'm forced to sit through an hour of content, I'll switch off. AI can tailor learning so I only do the 30% I need. That's efficiency, and it boosts engagement." - Zoe Wilson, DTBWOYL Ep. 6 – L&D for Your People 

At scale, AI makes this kind of personalisation achievable: 

"90% of workplace learning is just sitting there unused. AI can index everything and deliver the snippet you need in the moment. Instead of a 45-minute course you forget in a few weeks, AI reinforces learning with bite-sized updates served when you need them." - Oli Quayle, DTBWOYL Ep. 6 – L&D for Your People 

Organisations that can identify the skills required for future roles and map them against the competencies their existing employees already possess will be best placed to support employee development and avoid future skills shortages. By nurturing internal talent and redeploying staff from roles impacted by automation into growth areas, large businesses can reduce reliance on external recruitment and build a more resilient workforce.

Skills strategies fail when organisations cannot measure progress. For large businesses managing development across hundreds or thousands of employees, that means investing in systems that connect skills data across recruitment, learning, performance, and succession. 

For larger organisations with long-term growth goals, this means talent and performance management software that can map future skills requirements, identify current competencies, and surface skills gaps before they become business problems. If you are evaluating systems to support your skills strategy, our guide on how to choose HR software explores the key capabilities to look for in talent management and learning modules, particularly for organisations managing workforce development at scale. 

The data that technology surfaces changes how HR operates, moving it from reactive administration to proactive strategy. Dublin Port's HR team experienced this directly after implementing PeopleXD: 

"The data-driven insights provided by PeopleXD empower individual managers to make informed decisions about their teams. We can track performance, absence, availability, and other key metrics, providing a clear and objective view of each employee's performance. This helps us identify patterns, address issues proactively, and support our employees in achieving their goals."

"One of my favourite features of PeopleXD is the insightful reports. The reports generated from PeopleXD provide us with real-time information, enabling the understanding of trends, effective data analysis, and the anticipation of challenges. In our day-to-day work, this is absolutely crucial for managing our workforce effectively and ensuring that we have the right people in place." - Celine, Dublin Port 

Employee career development software can empower employees to take control of their own skills development, supporting internal talent mobility and, in the process, talent retention. Large organisations that can demonstrate genuine investment in employee development are more likely to avoid future skills shortages and retain the talent they already have. 

Livv Housing Group found that moving to a unified platform freed their HR team to focus on exactly this kind of strategic work: 

"Since using Access PeopleXD, we've been able to unlock our team's potential, as well as future-proof the organisation. We've reduced the administrative burden on the HR team, so their time can be freed up and dedicated to more strategic and meaningful HR activity to help the business meet our longer-term goals." - Guy Corbett, Director of Business Improvement, Livv Housing Group 

As Oli Quayle puts it: 

"AI won't replace HR, it's an enabler. It lets you automate the mundane stuff and gives you insights you couldn't see yourself because you're drowning in data. It turns intuition into evidence and helps HR become more strategic, backed by analytics and figures." (DTBWOYL Ep. 5 – Managing Complex Workforces) 

Talent and performance management software makes up an important part of our HR software, where you can manage the employee lifecycle end-to-end. PeopleXD Evo is our end-to-end, AI-enabled HR solution, with integrated people analytics and built-in payroll. As a unified HCM suite, it allows you to analyse patterns, determine skills gaps across your organisation, and take actionable steps to drive business impact. 

The UK skills shortage has been building for over a decade. The organisations that treat it as a recruitment problem will keep losing ground to those that treat it as a workforce development one. 

Large businesses that act now, investing in workforce planning, building a genuine learning culture, and deploying the right technology to connect skills data across the employee lifecycle, will be best placed to close their skills gaps, retain their best people, and build the resilience they need for 2026 and beyond. 

Ready to identify and close skills gaps across your workforce? PeopleXD Evo gives HR leaders the data, tools, and AI-powered insights to map skills, track development, and build a future-ready workforce.