For decades the United Kingdom’s economy has suffered from a well-evidenced systemic problem of low productivity compared to its key international competitors. So do we have the skills and ability to correct this? Arguably we should have been tackling this over the last 20 years, but we haven’t. Brexit and the competitive challenges we will face outside of the European Union from March 2019 has turned the spotlight back on to the “old”, apparently unsolvable, problem. So what will drive a substantial increase in productivity? There are four main factors.
First, government must invest in the infrastructure that will underpin the economy, such as better transport links and broadband capacity. Second, industry needs to increase investment in new technology, upskilling staff, equipment and new methods for making and delivering goods and services. To achieve this, we (employers) must have senior management who have the skills and knowledge to identify opportunities and then implement the right investments. They in turn need investors, such as banks and fund managers, who understand industry’s needs and can provide the necessary investment funds at terms that make the business case viable.
The third factor is having operational managers who are skilled at productivity and performance improvement, with a track record in achieving success and capturing the benefits. The fourth factor is to have a workforce that is properly skilled to work at a higher level of productivity; with access to the new tools, technology and methods.
As we can see skills for senior management, investors, operational management and the workforce are critical if we are to substantially drive up productivity. The government has now recognised that skills are crucial. Following reports such as those published by Professor Alison Wolf and Lord Sainsbury, the government in 2013 embarked upon a massive skills reform programme in England: rewriting apprenticeship standards (commonly called Trailblazers), bringing in an apprenticeship levy on larger employers and starting to reform technical education for 16 to 19-year-olds.
NOCN’s team has been one of the organisations supporting these changes at the detailed level. And it is from this experience that we are expressing our concerns about whether what is happening “at the coal face” will actually deliver the 30 per cent increase in productivity the economy needs over the next five years.
We believe that there is a naivety in some places that by training people they will somehow become more productive. That is just not the case. Without the requisite managerial skills, as well as investment in infrastructure, equipment and technology, an increase in productivity will not happen. The type of training must also be relevant and timely. Training people on the “old” ways of doing things will just reinforce the historic levels of low productivity. If we are going to train the workforce, they need to be trained on the new ways of producing and delivering goods and services, such as off-site assembly in construction, mobile banking and FinTech in finance or site access drones in engineering.
Just over four years ago the government started the initiative called Trailblazers to re-write all our apprenticeship standards in order to create “better quality” apprenticeships. As part of this change in May 2017 they introduced a “tax” on large employers called the levy to fund “better quality” apprenticeships. A new governmental organisation was also set up called the Institute of Apprenticeships.
Unfortunately, progress has been very slow. Only a small proportion of apprentices are now operating on the new standards and the new technical education and qualifications are not even ready for learners to commence. A full-quality assurance system to ensure we do get “more productive, better quality” people at the end of the process is still not in place. As a result, we have made little impact on the quality concerns, made in 2012, about the UK’s apprenticeship, vocational and technical education system. Added to this the system has further fragmented across the UK, arising from the changes in devolved arrangements.
The new Institute has defined “better quality apprenticeships” in England thusly: “An apprenticeship is a job with training to industry standards. It should be in a recognised occupation, involve a substantial programme of on and off-the-job training and the apprentice’s occupational competence should be tested by an independent, end point assessment. Apprenticeships are employer-led: employers set the standards, create the demand for apprentices to meet their skills needs, fund the apprenticeship and are responsible for employing and training the apprentice. But the needs of the apprentice are equally important: to achieve competence in a skilled occupation, which is transferable and secures long term earnings power, greater security and the capability to progress in the workplace.”
Intriguingly, there is no explicit mention of “productivity increase” nor the need to improve performance. Having been party to many of the groups working on the re-design of the UK’s apprenticeships, our observation is that at no point has there been a serious focus on what is needed to close a 30 per cent productivity gap. Neither do the new much-heralded management apprenticeships include the skill to increase productivity and performance. There appears to be a blind belief that training or change will by some miracle provide the skills for people to operate at a substantially higher level. This will just not happen.
The other gap in the government’s implementation for reforming skills, for a more productive economy, is the scope of the changes. To date much of the reform has been aimed at improving skills for new entrants. In any given year these only account for around 2 per cent of the workforce so the impact at the macro level will be insignificant. We must have major upskilling programmes for the existing workforce, not just the new entrants. This needs to tackle the low levels of literacy and numeracy identified in around 19 per cent of the existing workforce. The government’s current funding for functional skills English and maths is completely inadequate to make any big impact on this problem.
Ultimately, if we are going to tackle the UK’s long-term productivity problem, with its inherent long hours culture, and low pay and poor conditions, the government is going to have to substantially up its game on skills reform.
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