1 Skills. Table 2.1 Qualifications of working age population by UK nations and regions (ONS (2), 2012) UK Rank. North East

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1 1.1 Key messages 1 Skills West Midlands has the highest proportion of working age people with no formal qualifications and the lowest proportion of highly qualified people in England. West Midlands employers have relatively high numbers of jobs that require lower level qualifications, a trend that is predicted to continue. Of those not in employment, education or training (NEETS), the West Midlands consistently hovers around the lower half of English regions; in 2011 coming sixth out of the nine former Government Office regions. There is a mismatch between skills in the workforce and those required by businesses 1.2 Overview Historically, the West Midlands has performed poorly on skills. As Table 2.1 highlights, skills continue to be an issue with 14% of the West Midlands working age population having no qualifications, only Northern Ireland (21.3%) had a higher proportion. Indeed, across the West Midlands one in six of the working age population has no qualification; areas such as Sandwell, Stoke-on-Trent, Walsall and Wolverhampton fairing particularly badly on this measure. In comparison to the rest of the UK, the West Midlands also has a relatively low proportion of its workforce with qualifications of Level 4 and above (26.3%); once again only Northern Ireland has a lower proportion (25.7%) (ONS (2), 2012). Table 2.1 Qualifications of working age population by UK nations and regions (ONS (2), 2012) Regions and nations % with no qualifications UK Rank % with Level 4+ qualifications UK Rank North East North West Yorkshire and Humber East Midlands West Midlands East London South East South West Wales Scotland Northern Ireland UK The picture at a West Midlands level is reflected at a LEP level (Figure 2.1), although the breakdown of figures reveal the presence of some skills black spots. In terms of percentage of the working age population without qualifications the Black Country recorded the highest figure of 16.3%, well above the UK average of 10.9%. Similarly, in terms of percentage of working population with qualifications

2 % of 4 or above the Black Country recorded the lowest figure of 21%, again well below the UK average of 32.7% (ONS (2), 2012) Figure 2.1: Qualifications levels by LEP area Jan Dec 2011 NVQ 4 + NVQ3 NVQ2 NVQ1 Other qualifications No qualifications Source: ONS annual populatiom survey If skills are considered from the type of work the West Midlands population is engaged in then there is a clear mismatch between the skills of the labour market and the occupational skills requirement, this is particularly marked in the highly skilled occupations. This is demonstrated in Figure 2.2 which breaks down occupations into 3 groups, highly, medium and low skilled across the 6 LEPs. There are significant mismatches across all the LEPs; The Black Country had the lowest percentage, 35.7%, of the population engaged in high skilled roles (21% of the working population having qualifications of 4 or above in the Black Country), while Worcestershire recorded the highest percentage, 46.2%, employed in highly skilled occupations (29.4% of the working population having qualifications of 4 or above in Worcestershire).

3 Figure 2.2: Skills - Occupations LEP Level Highly skilled: Managerial and professional, associate professional and technical (SOC 1-3) Apr Mar 2011 Medium skilled: Administrative, skilled associates and trades (SOC 4-5) Apr Mar 2011 Low skilled: Elementary sales, services and operatives (SOC 6-9) Apr Mar 2011 Source: Review of Local Enterprise Partnership area economies 2012, The LEP Network The West Midlands needs to reduce its reliance on a low skill and low wage economy. If this issue is not addressed it is likely to remain in a relatively weak position, unable to fulfil its potential. Strategies and structures need to be established, or existing ones expanded to support the upskilling of the West Midlands workforce in order to provide a ready supply of the type of employees that knowledge intensive, high growth businesses need to develop and expand. This up-skilling could be achieved by placing more emphasis on skills rather than qualifications and the development of flexible work based training programmes and apprenticeships. Currently the West Midlands labour market is not equipped to fulfil future demands. 1.3 Graduate Retention The West Midlands is well served by universities, Birmingham and Warwick are in the highly rated Russell Group of top research universities suggesting a strong supply of Level 4+ qualified people being produced within the region. However, with the region s employers requiring relatively few highly qualified people, the West Midlands record of graduate retention is generally considered to be poor. In % of the West Midlands working age graduates (excluding those staying on in higher education) were still employed in the region six months after graduating; only Northern Ireland and the North East recorded lower figures, the highest figure, 49%, was recorded in London (ONS (4), 2012). Of all those graduating in the UK in 2010/11 a national survey (HECSU, 2012) showed that within six months of graduating some 21% ended up working in London, 12.5% in the South East, 11% in the North West, 7.8% in Scotland and then interestingly 7.7% in the West Midlands. For completeness, Yorkshire and Humber and South West attracted 7.5% each, East of England 7.2%, East Midlands 6.1%, Wales 4.7%, North East 3.8% and Northern Ireland 3%. Of course, this does not take into account the relative size of the different regions, for example the North West has a population of over 7.1million compared to the 5.6million in the West Midlands. This seems to present something of a conundrum, as although the West Midlands has a low proportion of graduates in its working population the West Midlands does not seem to do quite as

4 badly at retaining or attracting graduates as often thought. An interesting report on graduate regional mobility (Prospects, 2009) using 2006/07 data looked at the location of working graduates six months after their graduation and compared it to the number who gained a degree from an institution in that region. While London had a 61% net gain in graduates, the East of England showed a 40% gain and Northern Ireland a 13% gain. What is perhaps unexpected is that West Midlands was the fourth best performer albeit with a 1.8% net loss but nonetheless coming ahead of South East (- 2.9%), Scotland (-6.1), North West (-8%) and so forth, with the worst performer being the East Midlands registering a 29.2% net loss compared to the number of students who graduated from there. A dimension of this is the number of graduates that find employment in the same region as their higher education establishment. In this the East Midlands in 2006/07 also performed worst keeping only 41% of its graduates. The best performers were Northern Ireland (96.5%), Scotland (86.5%), London (73.4%), North West (68%) and Wales (61%). This left the West Midlands (58.5%) sixth in the table of the 12 UK nations and regions. The Report interestingly notes that while the West Midlands retained large proportions of its architecture and building graduates (79%), management graduates (67%) and law graduates (65%) it retained fewer than half of its physical scientists and engineers (Prospects, 2009). It would seem then that the West Midlands, like many other regions has a mis-match between the supply of graduates and the demand for them in the regional workplace. In its 2008 report on graduate retention and attraction the West Midlands Regional Observatory noted that the proportion of private sector employees with NVQ 4+ was 24%, above only the North East, East Midlands and Yorkshire and Humber of the English regions (WMRO, 2008). In contrast the Observatory s 2010 briefing on the projected impact of public sector cuts noted that nearly half of public sector employees in the West Midlands are qualified to degree level or above (WMRO (3), 2010). With serious contractions in the public sector expected to continue for the foreseeable future it will be considerable challenge to create sufficient high-level employment opportunities if the West Midlands performance is to improve (CLGWM, 2013). 1.4 Not in Education, Employment or Training NEETs At the other end of the educational spectrum the 2011 figure of 196,280 NEET year olds placed the West Midlands sixth out of the former nine English government office regions at a rate of 6.2%; above the three more northern regions, but behind the East Midlands and the southern regions. Changes in the way this age group of NEETs is calculated makes comparison over time difficult. However, looking at a wider age group of year olds and comparing the performance with the previous five years and with ten years ago (DfE, 2012) shows the picture is disappointingly consistent. Over this time the region s relative position has varied between 8 th and 6 th worst, reaching 8 th place in 2009 when 20.6% or 130, year olds were NEET in the West Midlands against a current rate of 19.8% (CLGWM, 2013). 1.5 Skills for SMEs The proportion of the West Midlands businesses reporting employees skills gaps has risen in recent years and is above the England average. Lower value added private sector activities such as hotels & catering and cultural, recreational and sporting activities and traditional private sector industries such as engineering & manufacturing have the highest proportion of skills gaps. This is having a significant impact on business performance, leading to increased workloads, increased operating

5 costs and problems in meeting quality standards and introducing new working practices (UKCES, 2009). Many employers are struggling to address skill needs via recruitment due to deficiencies in the labour market. The most common issue is a lack of adequate technical and practical skills among applicants although many also lack softer generic skills such as customer handling, written and oral communication and team working. Encouragingly, the proportion of the West Midland s workforce being trained by their employer has continued to increase despite the recession. The proportion of the region s workforce being trained by their employer increased from 64% to 68% between 2007 and However, it is notable that people working in the public sector are much more likely to be trained by their employer (91% in education, 88% in health & social care and 85% in public administration), whilst this is much less likely in traditional private sector industries such as engineering & manufacturing (60%) and in lower value added activities such as hotels & catering (65%) and retail & wholesale distribution (62%) (WMRO (3), 2010). An audit of regional skills priorities (UKCES (1), 2010) highlighted that, in particular, there will be a growing demand for skills in the following areas (WMRO (4), 2010): Management and leadership skills, especially corporate managers across a wide range of sectors Professional skills in the computing and software sector, in parts of health and social care, in pharmaceutical and medical technology, in manufacturing (i.e. traditional and advanced), especially for Science, Technology, Engineering & Maths (STEM) skills, and in teaching and research Technician and equivalent skills across many sectors, such as health and social care, utilities, chemicals, life sciences and pharmaceuticals, automotive engineering and broadcasting Intermediate vocational skills within sectors such as manufacturing, engineering, processing and construction associated with skilled trades as the current ageing workforce retires and emerging opportunities develop in some sectors and to support future demand at technician level The ageing population will lead to increased demand for care services with particularly significant volumes of staff in care assistant roles, that will need greater understanding of ICT to support care users with assisted living technologies Customer service and employability skills will be of growing importance to the service sector, including retailing as well as with after-service and maintenance roles in manufacturing and the digital economy Developing innovative technologies and services for low carbon buildings, for example building products, insulation, micro-generation, energy monitoring and smart meters etc Construction, construction materials, plumbing, heating and electrical installation in developing low carbon building and construction skills, linking to training providers such as the Centre for Refurbishment Excellence (CoRE) in Stoke-on-Trent. Developing skills amongst businesses and the workforce in low carbon energy and renewable energy, including links to training centres such as the Power Academy at Warwickshire College in Rugby. As the above list suggests there still will be a significant proportion of job market that relies on lower skills. These jobs are important as an entry point for various groups, notably those seeking to move out of long term unemployment. However, even many of these jobs will need up-skilling in order to make improvements in service/product quality and to meet changes in consumer demand. Overall, to move forward, the West Midlands economy will need to develop the sectors where higher skills are required.

6 1.6 Skills to support the uptake and use of ICT At a West Midlands level access to Super Fast Broadband (SFBB) (64.7%) is well above the UK average of 58%; however uptake of this technology (64.8%) is below the UK average (68%). This statistic demonstrates one of the key issues facing the West Midlands; ICT infrastructure is available across much of the West Midlands but uptake, particularly by SMEs, is low. In 2011, although 60% of the UK could access superfast broadband, only 6.6% of the population were actually using it (Ofcom, 2011). The low business uptake of superfast broadband has implications for economic development. It is estimated that if SMEs were able to more effectively exploit available ICT infrastructure, 18.8 billion of additional revenue could be generated across the UK (Booz & Co, 2012). In many ways simulating demand is as economically important as the provision of appropriate infrastructure. Although it is widely acknowledged that SFBB can be beneficial to businesses, there is a lack of understanding within the business community about how to fully exploit ICT to increase competitiveness, access new markets, and reduce costs. A survey of UK SMEs sponsored by the Lloyds Banking Group found that 23% of SMEs required training and support to develop even basic online skills, and 24% of SME owners believed that their companies did not have the skills needed to use the Internet for business purposes, except for simple online searches. The same research highlighted that 31% of the SME leaders needed specific training and support in Social Media (Optimisa Research, 2012). 65% of the UK s online population use social networks (You Gov, 2012), however only 1% of SMEs use social media to generate new business (The Drum, 2011). This low level of uptake is more prevalent in rural areas of the West Midlands. In a review of the rural broadband infrastructure in 2010 it was highlighted that most rural businesses are only interested in using the Internet for low intensity applications (website creation, , research), and generally there is low demand of broadband in rural areas. However, those undertaking the research concluded that this low intensity, low demand was mainly a function of low expectation and knowledge of the benefits of that good ICT infrastructure can bring to the day to day operation of their businesses. The key to addressing this block is awareness raising, education and training (AWM, 2010). 1.7 Skills for the Low Carbon Economy Moving to a low-carbon economy provides opportunities for aiding economic recovery and rebalancing the economy through the creation of jobs. It also offers the opportunity to capitalise on the UK s abundant renewable resources to establish a world class competitive advantage in low carbon industries (UKCES (2), 2010). In 2008/09 the UK had the sixth largest Low Carbon Environmental Goods and Services sector in the world, worth 112 billion per annum and employing over 910,000 people. By 2015 it is estimated that 1.2 million could be employed in the sector (BIS, 2010). For the UK to benefit from the transition to a low carbon economy the right skills must be available Demand The transition to a low-carbon economy will have labour market implications and although it is not exactly clear where growth will occur, low-carbon sectors that are expected to grow include: Energy generation Energy efficiency (especially of buildings) Energy and carbon accounting/monitoring Support services (e.g. consultants, climate change economists and financial advisors) Other sectors will need to diversify or change their products and supply chains, for example transport, agriculture and retail. Sectoral change will be mirrored by changing occupational demand.

7 Research into skills needs suggests that few of the critical skills for transition to a low-carbon economy are new. Workers in existing occupations should be able to 'up-skill' to fulfil new roles in a changing economy and with the expected growth in low-carbon related employment it is likely that more of these skills will be required (CEDFOP, 2010). A report on Strategic Skills Needs in the Low Carbon Energy Generation Sector in the UK reinforced the essential role of up-skilling (UKCES (2), 2010). It identified the importance of STEM (Science, Technology, Engineering and Mathematics) skills at National Qualification Framework levels 3, 4 and 5. It will also be important to improve generic skills across the workforce, as sustainable development requires a holistic approach and almost every job will need to adapt during the transformation to a low-carbon economy. These generic skills include: Traditional skills, such as leadership, management and communication Green skills relating to preparing for new environmental legislation, and improving resource efficiency Technology transfer and commercialisation skills Table 2.2: Identified skills needs of low carbon activities (ECORYS, 2008) Carbon capture and storage (CCS) Technically more complex operations will involve workers with very different skill set. Higher-skilled, higher-paying employment will arise due to energyefficient equipment. Jobs are likely to be performed by workers who already work in the Buildings building sector. However, these jobs will be redefined in terms of new skills, training, and certification requirements. Potential will arise for highly skilled researchers and engineers. Extensive training needs in four main areas: diagnostic techniques, knowledge of renewable energy, installation, organisational skills (i.e. town planning). Cement Jobs in this industry are expected to require higher levels of skills. Wind power industry (renewables) Climate change Agriculture Electricity Rail sector Waste treatment and recovery/ recycling Many of the positions will require highly skilled people. Universities need to consider offering entirely new study fields and majors due to technology development. Climate information and forecasting as well as R&D into crops adapted to new weather patterns have the potential to create specialized and high-skill employment. Jobs for agricultural skilled workers, for clerks and for craft and related trades workers will decrease. The requirement for skilled agricultural and fishery workers will be about 2.2 million in It is probable that together with technical competences management skills will be required. It appears that a dangerous shortage of skilled workers is emerging. This shortage of skilled workforce might take place by The quick technological changes in these sectors are creating an increasing demand for new skills Leadership and management A Defra-commissioned review of evidence on the skills needed for a low-carbon economy highlighted the significance of leadership and management (Pro Enviro, 2009). Additional research indicated that classical or traditional leadership skills are crucial for economic transformation, but will need to be applied in a new and more complex situation (Business in the Community, 2010). The leadership skills identified as most important included:

8 The ability to inspire change on sustainability Commercial awareness to identify the risks and opportunities presented by a sustainable economy The ability to translate knowledge about sustainability into successful business strategies Effective and persuasive communication In addition, new styles of management will be needed. The research identified demand for more and better executive education to help businesses make the transition to a sustainable economy. For example, managers will need support to help them utilise the skills their staff have developed. It concluded that developing the leadership skills needed for the transition to a sustainable economy is both urgent and critical to the UK s future economic success (Business in the Community, 2010) Supply To ensure a supply of the required skills, workers will need help to adapt their existing skills to a lowcarbon context. In addition, the supply of some skills may need to be increased as a result of demographic changes and the retirement of skilled workers (CEDFOP, 2010). This could mean education and training system coming under pressure to quickly deliver unexpected competencies. Business support advisors may need specific low-carbon training to ensure they are sufficiently knowledgeable to provide relevant support (Business in the Community, 2010). With approximately 80% of the 2020 workforce already in employment there has to be an emphasis on workplace and vocational training if low-carbon skills needs are to be met. Training provision will also need to be affordable and accessible, and funding systems will have to adapt to the delivery of shorter term courses (SWM, 2013). Environmental understanding will have to be mainstreamed into education and training systems. This can be achieved by integrating sustainable development into existing qualifications and National Occupational Standards along with the consciousness of managers and leaders. Cogent (the UK's industry skills body for chemicals, pharmaceuticals, nuclear, oil and gas, petroleum and polymer businesses) is leading other Sector Skills Councils and partners to develop National Occupational Standards and qualifications on sustainable business practice (SWM, 2013). 1.8 Conclusions* The West Midlands suffers from low skills across the board and support needs to be extended to break this cycle in order to aid the transformation of the economy from one of over reliance on low value added sectors. More specifically, SMEs are not taking advantage of SFBB due to a lack of understanding of the benefits but also due to a lack of skills. Equipping SMEs with the skills required and educating them of the potential benefits will lead to growth opportunities that in turn will create new jobs, some of which will require higher level skills. The transition to a low carbon economy holds many opportunities for companies to diversify and grow and it is generally felt that existing workers will be able to up skill. However there will still be a need to train the labour market in these skills in order for them to take up employment opportunities that will be generated by growth in these emerging technologies and sectors. Finally, leadership and management skills are key to achieving a transformation of the West Midlands economy and support is still required in these areas.

9 *It should be noted that as skills are integral to SME Competitiveness, RTDI, Low Carbon, Environment and Climate Change the authors decided not to produce a separate skills SWOT analysis or a list of possible actions based on such an analysis. Consequently, skills have been integrated into the various SWOT analyses and list of actions in the following chapters.

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