Recently, the FT showed that contrary to popular belief the most troubling issue for SMEs in Europe is not access to finance but access to skills – with the level of concern and the gap between the issues getting larger.

If this is true, British business and SMEs in particular have even more reasons to be concerned in light of Brexit. The UK benefited greatly from the access to the EU’s common labour market and was able to attract a sizeable workforce with intermediate and higher level technical skills from other EU Member States. Losing availability of potential employees with adequate skills from abroad to fill the gaps identified by SMEs is going to make it even more important to understand how learning in the workplace, and more generally, participation in technical education by adults, needs to develop to ensure an adequate supply of the skills needed by the economy.

Are there reasons to be concerned?

Through our work for NIESR and the Centre for Vocational Education Research we spend a lot of time thinking about this question. Evidence on adult skills training from the UK Labour Force Survey shows that SMEs are right to be concerned: The percentage of 16-65 year old employees participating in learning activity has been on a downward trajectory since 2000 (Figure 1). There has also been a large increase in the proportion of people doing very short training programmes (Figure 2) and a decline in the percentage of people working towards a qualification (Figure 3).

When we restrict attention to the age group 25-65 (excluding 16-24 year olds who are more likely to be enrolled in full-time study) there is a similar decline in training towards a recognised qualification (Figure 3) and striking changes in the types of training and qualifications undertaken.

In line with the general expansion of participation in higher education the share of the 25-65 year old employees aiming for university degrees and diplomas has reached almost forty percent of the older age group, an increase of fifteen percentage points since 2000.

In contrast, participation in technical education below degree level has declined for both accredited training (NVQs and other technical, including e.g. BTECs) and other technical and professional education

(Figure 4)

There are some small but encouraging positive developments

While the overall trends in training are a cause for concern, there are also some important positive signs of improvement, especially when looking at the level of learning: First, there has been a steady growth in basic skills training for people with poor maths and English skills, which have great benefits in the workplace and beyond which was almost non-existent in 2001 (see bottom line in Figure 4). Second, intermediate level technical qualifications (at Level 3 and more recently at Level 4) have been growing (Figure 5), displacing some of the Level 1 and Level 2 qualifications, which have fewer benefits for individuals and businesses. The chart shows development for the largest group of technical qualifications (NVQ/SVQs), but the picture is similar for other important technical qualifications such as BTECs.

But the overall picture remains a cause for concern

This changing pattern of skills investment is indeed reason to be concerned because employers looking to fill technical and associate professional roles, for which intermediate technical qualifications are needed, are seeing a decrease in training in the relevant skills. Moreover, with the UK leaving the EU’s common labour market and losing availability of potential employees with adequate skills from abroad to fill the gaps, the prospects of businesses, and SMEs in particular, are clearly deteriorating unless we see a material increase in intermediate technical and professional education.

What needs to happen?

While the increasing popularity of Level 3 and 4 qualifications (with significant earnings returns) amongst adults in continuing education is very positive, it is vital to reverse the trend of the overall decline in the proportion participating in technical education. Student loans introduced a couple of years ago did not improve activity here.

The launch of the apprenticeship levy earlier in this year could make a real difference here if new programmes helped lift learner numbers working towards Level 3/Level 4 technical qualifications and reduced the number of low skilled adults. This should be looked at closely in order to understand whether the levy is achieving its goal to provide the economy with a better skilled workforce with better skills to the economy, and if it is not, the system should be modified.

Further information about the effectiveness of the skills system and where improvements are needed can be found at the Centre for Vocational Education Research.