More than half (56%) of organisations in Scotland are reporting skills shortages, new data shows.
This year's Business Barometer The report, published by the Open University and the British Chambers of Commerce, said this was lower than the UK average of 62% and a slight improvement on the 2023 UK results, where almost three-quarters (73%) reported skills shortages.
However, with only 23% of organisations implementing a written skills plan for their workforce this year, this is preventing them from strategically addressing these issues and preparing for future demands.
While 56% of organisations say they lack confidence in applying new artificial intelligence (AI) and 47% lack confidence in adopting green technologies, employers agree that these skills are crucial to the growth and sustainability of UK businesses and the economy as a whole.
Skills shortages and lack of confidence continue to have a knock-on effect on staff morale and wellbeing, with 77% of employers saying skills shortages have increased employee workload, indicating employers need comprehensive skills plans to close key gaps.
The report also found that 38% of Scottish businesses plan to use mentoring or coaching in the next 12 months, and 32% plan to use apprenticeships in the next 12 months.
While there are efforts to address the skills shortage, the survey also found that the majority of organisations (52%) still have no specific recruitment, training and retention initiatives targeting underrepresented groups, such as young people, older workers, people with disabilities and neurodiverse people.
Baroness Martha Lane Fox, Chancellor of the Open University and chair of the British Chambers of Commerce, commented: “Despite some small signs of improvement, the skills gap remains high.
“What is concerning is the extremely low level of trust in AI and green technologies, as well as the lack of strategic planning or efforts to engage important underrepresented groups, both of which are essential to addressing the crucial challenges of our future.”
“By fostering innovative strategies and inclusive approaches, we can close the skills gap and build a more resilient workforce.”
David Allen, senior partnerships manager at The Open University Scotland, said: “It's pleasing to see that the number of Scottish businesses reporting skills shortages is lower than the UK average, but the fact that over half still face these challenges shows there is still work to be done.”
Anna Ashton-Scott, head of skills at The Data Lab, Scotland's data and AI innovation centre, commented: “It's encouraging to see that Scottish businesses are more confident in applying AI technologies than their UK peers, but more needs to be done to support the 56% of organisations who lack confidence.”
“In a time of rapid technological advancements and a widening skills gap, upskilling not just technical teams but all areas of the business will help prepare people and organisations for the evolving data and AI environment.”
The data comes from an online survey conducted among 1,305 organisations across the UK between April and May. Respondents came from all sectors and geographies, with 90% of companies having fewer than 250 employees.
Meanwhile, new data from Grant Thornton UK suggests productivity at medium-sized Scottish businesses is falling due to a shortage of key skills.
Consulting company's latest Business Outlook Tracker Half of Scottish business leaders surveyed believe a shortage of key skills is affecting productivity levels, with financial skills being the most needed (28%), followed by complex practical competencies such as technical and data skills (tied at 24%).
A survey of mid-sized regional Scottish businesses revealed that 88% plan to invest the same or more in skills development over the next six months, with many already setting up their own development programmes and 75% of those who cited a digital skills shortage are implementing in-house coaching to boost these.
However, 57% of respondents who need finance skills do not currently have in-house training.
That tech is a productivity concern for many businesses is reflected in the fact that 90% of businesses plan to increase or keep their technology investment the same over the next six months. The growth of AI is perhaps a key aspect of this, with only 14% of businesses believing that AI will not have a positive impact on productivity over the next 12 months.
The survey also found that productivity issues now affect almost every aspect of medium-sized businesses, including their ability to export, recruit, train and upskill employees.
In addition to the skills shortage, other key factors impacting productivity levels among Scottish businesses include a lack of funding for further investment (36%), increased employee stress and burnout, difficulties attracting and retaining top talent, and lack of employee engagement or low morale (all at 26%).
Greater investment in skills and training was also named as the policy area Scottish business leaders most want to see the government focus on in the long term. Ahead of the election, the vast majority of Scottish businesses (84%) claim they are confident the next UK government (of any political party) will focus on prioritizing long-term solutions to address the country's public and private sector productivity challenges.
Stuart Preston, practice leader for Grant Thornton's Scottish office, said: “It is clear that there is strong demand for further investment in skills development in Scotland, with business leaders recognising the need for improved financial, data and technology skills to improve productivity.”
“The lack of necessary skills development, coupled with the difficulty in attracting and retaining top talent, can snowball and strain current human resources, ultimately leading to increased workload and inefficiencies. This further exacerbates the productivity challenges facing the market and contributes to the increased employee burnout we are seeing in the region.”
“Ahead of the election, the major political parties have made clear their focus on strengthening the skills and training opportunities available to the country’s workers.
“It is therefore vital that political parties listen to what medium-sized businesses, the driving force of the UK economy, want and provide solutions that address the constraints currently holding back growth and productivity in this core sector of the UK economy.”
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