Overhauling the capital’s skills system

Significant changes need to be made to skills and training provision in London if the capital is to continue to thrive. That was the outcome of a report by LCCI and London Councils launched earlier this year. London Business 1000: Assessing the capital’s skills challenge (based on an annual survey of more than 1000 London business leaders) finds that businesses in the capital continue to face considerable skills challenges.

The London Business 1000 report highlights the following:

  • 42% of businesses that have to pay the apprenticeship levy still do not plan to use apprenticeship funding over the next twelve months – while an additional 40% expect to spend just half or less
  • If apprenticeship candidates were better prepared for the world of work, half of London businesses say it would make them more likely to employ more of them
  • Skilled manual/technical roles are most likely to be identified as those where businesses faced skills challenges, followed by professional and managerial roles and unskilled/semi-skilled ones
  • Three in five companies who tried to recruit over the past 12 months encountered difficulties finding new staff
  • 31% of companies who tried to recruit during the last 12 months said job candidates lacked technical or job specific skills. A lack of literacy and written communication skills and commercial awareness also remain prevalent
  • Three in five business respondents identify skills shortages among their current workforce, with technical or job-specific skills most commonly identified followed by advanced or specialist IT skills

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LCCI will continue to work with London Councils to help address London’s skills challenges. The report lists a number of recommendations for policy makers in Westminster, City Hall and our boroughs to support London’s skills system.

1. Devolution
The report argues that increased devolution of skills funding to the capital is required. Local government, with its firm democratic mandate and local knowledge, is best placed to respond to the needs of both its local residents and business community. Further devolution will help boost transparency and accountability and can raise the effectiveness of service delivery. The devolution of the adult education budget to London from 2019 is welcome, but to make a more substantial impact a wider package of skills devolution is needed, including 16-18 skills provisions, all vocational capital investments, careers information, advice and guidance, as well as the apprenticeship levy, starting with unspent levy funds.

2. A new skills focus
Access to relevant technical skills, improving digital skills and better employability skills for job candidates should be a focus for London. Regarding technical skills much is happening already, including efforts to create more high-quality apprenticeships, the introduction of T-Levels and the establishment of institutes of technology. However, more will be needed to supply London with the technical skills it needs. For example, the introduction of T-Levels will require sufficient funding to bring parts of the Further Education sector up to industry standard and create more places. Another key issue is the need to increase digital capabilities among London’s workforce (which is already a focus of the Mayor’s Skills for Londoners strategy), and the report argues that apprenticeships and other training should include a focus on this. This includes promoting digital apprenticeships and T-Levels, and making digital skills a core competence across apprenticeship standards. More emphasis is also needed on employability skills. For example, the Mayor, as part of his devolved adult education budget, should focus on integrating employment and skills support.

3. Apprenticeships
The government has the ambition to significantly increase the number of apprenticeships in the capital and the apprenticeship system has recently undergone significant reform. However, the London Business 1000 report argues that the government should look to reduce bureaucracy and make the apprenticeship system simpler. For example, the introduction of the apprenticeship levy has moved some of the administrative burden from providers to employers which acts as a barrier to businesses taking up apprenticeships.

4. Reviewing the apprenticeship levy
One of the main challenges highlighted by the London Business 1000 is the functioning of the apprenticeship levy, with more than 40% of levy payers not expecting to use their levy funds over the next 12 months, and an additional 40% expecting to spend just half or less. One way to address this is by making the levy more flexible, including allowing payers to use their levy spend for pre-employment training to get people ready for an apprenticeship. However, more is needed, and LCCI believes the government should review the levy in London – and ultimately consider turning it into a wider training levy. Rather than be returned to national government, unspent funding should be devolved to London government and be used to increase awareness of apprentices, support small businesses to be better prepared to take on apprentices and support potential apprentices to be well prepared for the job. This should significantly boost skills outcomes across the capital.

Read our monthly magazine London Business Matters for more on this topic.

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