The government risks losing out on £3.3 billion in economic output if it fails to adequately support the college sector, according to a new report.

Of that amount, £1.7 billion relates to the Stem-relevant T-level routes of engineering and manufacturing, digital, health and science, says the report, entitled "Skills Shortages and Funding Gaps: An analysis of the costs of under-investment in skills" and published by the Association of Colleges today. 

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Tackling the skills gap

The government’s recent Employer Skills Survey showed an increase in the density of hard-to-fill vacancies from 16 per cent of all vacancies to 22 per cent between 2011 and 2017, says the AoC, adding that a recent survey of small and medium-sized enterprises (SMEs) showed over half were finding it more difficult to recruit employees with the right skills. Almost six in 10 said that finding skilled candidates was the biggest concern regarding the future of their business.

With uncertainty around Brexit and an ageing workforce also likely to contribute to skills shortages, and some of the sectors likely to be hit worst including engineering, construction, health science and digital, the report predicts there will be approximately 30,000 unmet childcare vacancies and 300,000 unmet construction vacancies.

And while the government has aimed to address this with policies such as the introduction of T levels, higher technical qualifications and the National Retraining Scheme, colleges warn they will not succeed unless FE receives a funding boost. 

The AoC analysis shows that even when performing at maximum efficiency, delivery of the government’s flagship T levels programme and all current 16-19 study programmes is not viable at the current level of funding, and that the additional £500 million allocated to T levels in the spring budget of 2017 will not address the under-funding of the further education sector.

“Modelling on the basis of typical rates of job turnover against projected demand from growth and replacement of existing workers for each T-level route, and using skills shortage densities from the Employer Skills Survey 2017, we calculate £3.3 billion in lost output between 2019 and 2024," says the report.

“We used conservative assumptions in reaching these figures, relating them only to relevant occupations where level 3 or higher qualifications are the norm. We assumed no worsening in the prevalence of skills shortages impact in high value-added sectors. We estimate a £1.7 billion economic impact in the Stem-relevant T-level routes of engineering and manufacturing, digital and health and science."

Colleges are calling for an increase of £1,000 to the 16-19 education base rate. David Hughes, chief executive of the AoC, said: “The government has recognised how vital it is to improve the skills system and has set out an ambitious plan. Sadly, that plan is doomed to fail until the ambition is matched by investment.”

He added: “As more people retire, and uncertainty, demography and migration controls reduce the numbers joining the workforce, it’s vital that we get this right. The government is pinning its hopes on its flagship policy, T levels, but as our analysis shows, it is impossible to deliver them, even at maximum efficiencies.”

“The government needs to listen to those it is asking to deliver them. Colleges are saying clearly that as much as they want to deliver them, they cannot. As the chancellor well knows, there is a cost to not investing in skills – our conservative estimate is that cost amounts to at least £3.3 billion over the next five years – as well as the intangible costs to individuals and communities.”