The UK General Election - 4th July 2024


Investing in people

An industrial strategy needs the right people

As Brexit looms large and the need to boost global exports becomes a top priority, policymakers must also confront the interlinked problems of low economic productivity and social immobility. The failure over some 40 years to tackle these now well-defined characteristics of the UK economy means the challenge to upgrade and modernise the manufacturing sector is urgent.

The causes of low productivity are many, but there is one fundamental requirement for a competitive economy—skilled, innovative and efficient human resources. Education and training are crucial in the effort to create and sustain such a workforce. But any strategy must also include measures to improve the chances of people in communities where economic aspiration and social connectivity are in short supply.

With the increasing interest in artificial intelligence, robots and new materials, it is easy to be lulled into a sense of complacency about where new employment opportunities will emerge. The real questions are about the future of work itself and how people are prepared for it. The impact of new technologies is difficult to predict, but economic history strongly suggests a pattern of adjustment and then growth, especially in manufacturing.

Many of the skills required now are rooted in science, technology, engineering and mathematics—the so-called Stem subjects. This is exemplified by the chronic shortage of engineers; in broad terms the UK economy requires over 80,000 more in addition to the 100,000 produced annually. Worse still, employees with certain types of expertise, including electronic engineers, are almost impossible to find. In response to this, university technical colleges are making an impact, and the most successful are usually those with strong business involvement and clear routes to future employment.

Stem subjects should feature even more strongly in schools. Partly, this is about encouraging young children—even in primary school—to develop an interest in the Stem subjects. By secondary school, competence in mathematics is essential and the case for a form of international baccalaureate, which includes mathematics and a language, is gaining traction. The schools where Stem subjects are popular are often those with high levels of engagement with engineering businesses, underlining the value of a firm relationship between the worlds of work and education. The example of Germany is instructive, where business supply chains often formally include education institutions.

The future of work in manufacturing will not just be about Stem subjects. “Life skills” are increasingly important. Business organisations are constantly exhorting government to address concerns about school leavers and students being unfamiliar with the demands of the working world and, more particularly, worries over communication skills. New manufacturing is all about design, complexity, timeliness and specialism, so a package of skills is more likely to be required by employers. As supply chains become even more embedded in all economic activity and the UK faces new trade barriers on account of leaving the EU, the so-called soft skills will be more in demand.

This means the relationship between academic and vocational education might be more intimate and, certainly, interchangeable. In Finland, where young people can easily move between academic study and more work-related training— technical and professional—the approach to the purpose of education is more inclusive. The emerging Multi-Academy Trust system in England should be encouraged to replicate the best aspects of this approach.

Managing the workplace requires another set of abilities. Productivity is not just about having the right access to skills but it is also about the deployment and management of skills. According to many surveys, middle management in the UK is weak, thus compounding the lack of productivity. The next stages of development in manufacturing will require a new type of firm, where making the most of skilled human resources will be a key determining factor for success.

Retaining skills is also likely to be challenging as the global economy becomes increasingly interconnected. A good place to start in this respect is to encourage the export of education, which means international students should not be included in immigration figures. Universities are pivotal to the growth opportunities for our cities—especially in the regions. Enabling them to attract the best will contribute to economic growth, job creation and, ultimately, social mobility. In short, it is about investing in people from start to finish.

Read the full report here.

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