OPPORTUNITY UK. Optimising the skills and education landscape to deliver a Modern Industrial Strategy 1

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1 OPPORTUNITY UK Optimising the skills and education landscape to deliver a Modern Industrial Strategy 1 This paper sets out a cross-sector set of proposals (aligned to and supporting individual Sector Deals and the wider Industrial Strategy) which can increase the technical skills of the nation so that the UK raises productivity, boosts economic growth, increases social mobility and meets the four Grand Challenges. The skills landscape is in a continuous state of change; recent developments include the Apprenticeship Levy and National Colleges, soon to be followed by T-levels, Institutes of Technology and the skills dimension of the Sector Deals that feature as part of the Government s Industrial Strategy. This is against the backdrop of rapidly changing skills needs as technological changes are revolutionising whole sectors - automation in engineering, advanced therapies in science, artificial intelligence in digital and the massive impact of digitisation in film, TV production, animation and games design in the creative sectors are just a few of the examples. Whilst these changes bring many challenges, they also offer opportunities. This paper proposes potential solutions in support of the Industrial Strategy White Paper and Sector Deals with particular reference to the creative, digital, engineering and science sectors. Delivering on the skills actions is key to a successful Industrial Strategy, as recognised in the People chapter, and the sectors of the economy represented in this paper are ready to collaborate with government to drive that agenda. Technical skills are acquired through a variety of technical pathways leading to careers in pure technical job roles, e.g. in science and engineering, to those that require a fusion of technical skills, e.g. coding plus artistic representation which is needed to create animation for film, TV and games. Different occupations require technical and creative skills in different proportions, compare nuclear engineering to games design for example; but people with a mixture of these skills are increasingly important across sectors, as illustrated by the projection that within 20 years, 16.5 million people will need to be skilled to be Digital Workers or Digital Makers 2. Although many of the remarks in this paper are applicable to the wider economy, there is good reason to focus on the creative and technology sectors; between them they represent 6.88m employees and a 335.8bn Gross Value Added. Cross-sector opportunities have been identified where flexibility of approach within government policy can bring significant benefits in delivering the Industrial Strategy. This includes meeting the 3 million apprenticeships target and securing stronger employer buy-in to skills policy more broadly. Technical job roles are often seen as only for the most academically gifted and only accessible via the traditional university route and, in the creative sectors, often for those with connections. Better careers information to help young people understand their options (whether via the academic or 1 Strategy-Commission.pdf 2

2 vocational route) is key to increasing the diversity 3 of entrants into the creative and technologybased sectors that offer rewarding and well-paid jobs with good career prospects. We welcome the recently-published Careers Strategy and its commitment to reinvigorating careers guidance. 4 Well-designed technical training can provide good vocational routes into careers across the sectors in question. The new employer-designed apprenticeships are already offering thousands of young people new opportunities, with over 7,500 new starts on technical apprenticeships between August 2016 and July These apprenticeships are providing a viable vocational pathway to a technical career for those who do not follow the traditional university route and importantly there is a significant pool of potential talent that thrives best through vocational pathways rather than the traditional academic routes. There are clear social as well as economic benefits to maximising opportunities for non-academic entry routes and, conversely, an opportunity cost to not doing so. Universities also see the value of vocational-focused degree courses and increasingly recognise the importance of employer input into the design to ensure that students have the best possible chance of securing employment on graduation. However, the quality of technical training and education provision is still too variable as the Industrial Strategy notes, we need to establish a technical education system that rivals the best in the world Those buying training, whether an employer, a student or an apprentice, need to be confident that the training will lead to skills that industry needs and values. Getting this right informed customers and a well-functioning, dynamic training infrastructure is key to supporting a market-driven uplift in the technical skills capability of the nation. In the light of the Brexit vote, there is a political imperative to reduce the current reliance on foreign workers. Whilst this is a challenge, particularly in those sectors that rely heavily on recruiting from abroad, it is also an opportunity for a renewed focus on increasing the technical skills of the UK workforce that the economy increasingly relies on so that we can embrace, with confidence, the new challenges that globalisation and technological change bring. Finally, the proposals in this paper reflect the vital importance that small and medium sized enterprises (SMEs) play in the economy, and the reality of a changing workforce, including the growth in the numbers of freelancers and other self-employed people. No skills strategy will be successful unless it recognises the special challenges faced by the SME community and the changing nature of work and the workforce. The do nothing scenario is not an option - there is a real risk and opportunity cost to UK plc if it fails to invest in the skills of the workforce. We have identified five skills-related areas that offer opportunities for development: Improving careers information advice & guidance Ensuring the Apprenticeship Levy meets the Government s objectives for it 3 Women represent 21% of the core STEM workforce in the UK, with the lowest proportion in engineering occupations at just 8%

3 Ensuring Apprenticeship Standards are fit for purpose and reflect the changing needs of the economy Improving the availability and quality of training provision Upskilling the native workforce, thereby ensuring a healthy balance between home-grown workers and continued but managed two-way migration 1. Careers Information, Advice & Guidance (IAG) Careers information, advice and guidance (IAG) has been an area that employers across sectors, young people, and government have consistently identified as being patchy and not up to the required standard. For example, less than a third of young apprentices who responded to a recent survey conducted by the Industry Apprentice Council (IAC) 6 said their careers advice had been good or very good at school or college. According to the latest CBI/Pearson Education & Skills Survey 7, some 84% of employers also believe that careers IAG is inadequate. The Government s new Careers Strategy recognises the challenges and has acknowledged that for too long, careers guidance has not been given the status it deserves. The four pillars of the Strategy include the central role of employers and we very much welcome that - of employers surveyed (CBI/Pearson), 81% said that they were already involved in local schools, with many stating they would like to do more than at present. Employers from across the economy, large and small and in different sectors have identified a number of core opportunities for a step-change in the availability and quality of careers IAG, which are very much in line with the Government s own thinking as set out in the Careers Strategy Lack of dedicated provision: according to government evidence, three-quarters of schools do not have dedicated careers IAG provision. The Careers Strategy is explicit that employers are integral to great careers advice, and employers in our sectors are ready to respond. We look forward to working closely with the Government to ensure successful implementation of the Strategy and hope a framework will emerge for cross-sectoral linkups which will enable all the stakeholders to play their part in making a genuine difference on the ground in schools and colleges across the country. We welcome the commitment that every school will have a Careers Leader and we would urge that a key part of their job description will be to engage with local employers Poor promotion of all suitable routes post-education: over three quarters of IAC survey respondents said that at their school or college, higher education was clearly marked as the primary pathway to aim for. Ofsted reported 8 that although 68% of schools visited were rated good or outstanding for promotion of apprenticeships, in too many schools university applications were prioritised before those for apprenticeships. The Careers Strategy is clear that young people should receive advice that is agnostic between academic and vocational routes into careers. To make this work in practice, those offering careers advice need support to fully understand the options and we recommend developing an UCAS-type approach to vocational routes. 6 :

4 We welcome the statement in the Industrial Strategy White Paper that the government intends to update school and college performance measures to ensure that students can make an informed choice between technical or academic education. The Careers Strategy backs this up, stating that Ofsted must comment in college inspection reports on careers guidance and Schools and colleges are expected to publish details of their careers programme but we would welcome the opportunity to discuss with government how the published performance in terms of pupil destinations can be designed to give equal recognition to vocational and academic routes taken by the students when they leave school or college. We also welcome the reference to the importance of STEM careers advice but would emphasise the importance of defining this widely, as we do in this paper, to include the increasingly important creative sector which is, itself, increasingly technical Linking up educators with employers: most teachers followed the traditional academic path into their own careers (A-Levels followed by university) and, consequently, lack first-hand experience of other routes into work. Building on existing examples of good practice (e.g. the STEM Exchange), employers will work with government and educators on the creation of a mechanism which would enable teachers to access good-quality CPD opportunities with local employers. This could be linked with existing policy priorities, and developed through the Careers and Enterprise Company (CEC), and we welcome the plan in the Careers Strategy to give the CEC a more ambitious remit Clarification of funding opportunities: the post-16 education and training landscape can be a confusing one, with UK, national and local government all having a financial stake in the provision of bursaries, travel costs and other financial aids for learners to access further educational and training opportunities. Indeed, the Careers Strategy acknowledges the challenges of duplication and unclear objectives amongst funded stakeholders. We look forward to hearing how the landscape can be simplified so that all young people are able to access the funding they need and careers advisers in education and training providers can access the relevant information to pass on to those they advise. 2. Apprenticeship Levy The Apprenticeship Levy is playing a key part in reaching the Government s target of 3 million apprenticeship starts by 2020, but it is about much more than the numbers. The Levy offers an opportunity to achieve real social mobility, with apprenticeships providing new routes into well-paid and interesting jobs for people who would otherwise be excluded. Apprenticeships (which now range from Level 2 to Level 7) can help young people enter careers which require technical skills and provide progression routes to the very highest levels in business, thereby boosting social mobility and productivity. Higher-level skills are critical for the UK to make the most of opportunities offered by technological developments and remain prosperous. That is the opportunity, but the current rigidity in how the Levy can be used and concerns about the 20% off-the-job training requirement means there is serious risk of failing to capitalise. For example, over three quarters of SMEs (which make up 99.3% of all private sector companies in the UK) believe that apprenticeships are not for them the system needs to work for them in ways it currently does not. Only 25% of Levy-paying companies expect to use most or all of their Levy with 21% using none

5 of it 9 - yet more flexibility would enable these Levy-paying companies to support their SME partners to take apprentices and/or invest in the freelance supply chain. We also note that the latest apprenticeship statistics show a 59% drop in starts, although we recognise that this may be a feature of the transition to the new system. We note and welcome that the Government is keeping under review potential flexibilities in the use of the Apprenticeship Levy (Budget, November 2017); these will be critical if the target of 3 million starts by 2020, reconfirmed in the Industrial Strategy, is to be met. Companies across the sectors have identified where additional flexibilities in the use of the Levy would strengthen the Government s objectives for apprenticeships, without requiring additional public expenditure Supporting SMEs: 96% of SMEs that have recruited an apprentice report a business benefit and 75% an improvement in productivity. However, almost three-quarters of SMEs remain to be convinced about the merits of taking on an apprentice 10. Unused Levy from sector Levy-paying companies should be available to support the sector SME supply chain. This could include an Employer Apprenticeship Bursary for an SME taking an apprentice for the first time, and/or a contribution to wages or support for the paperwork and recruitment process Levy transfer to an ATA: many Levy-paying companies want to train apprentices and draw down their Levy funding but a number of factors prevent them from training more apprentices. Companies can have headcount restrictions, particularly if in foreign ownership, but are open to train new apprentices. It is proposed that companies are given the freedom to transfer up to 100% of their Levy (as opposed to 10%) to an ATA (Apprenticeship Training Agency) that would manage the apprentice working on-site but off the headcount, increasing the number of apprentices trained Off the job training: over 60% of companies 11 highlight the 20% off-the-job training as a major restriction to training, as releasing significant numbers of the workforce off-the-job impacts company performance. Employers often lack an understanding of the definition of off-the-job training and providers need to provide this clarity. However a more flexible approach to off-the-job training is recommended, with employers being involved in discussing with the Government how that might be achieved whilst, at the same time, ensuring apprenticeships deliver high--quality training. A flexible approach in using the Levy would help to drive a growth in apprenticeship numbers and raise higher- level technical skills in line with the Government s Industrial Strategy. 3. Apprenticeship Standards The introduction of the new Apprenticeship Standards offers employers more input into the design and delivery of apprenticeship training and employers see this as a positive development. However, we need to look at the emerging evidence of how the new system is working to see where simplification of the Standards landscape could increase relevance and take up. The first apprentices on the Standards are now starting to complete and given the fast-changing nature of the job roles in the technical sectors, the employers are keen to see a more agile and streamlined process for the 9 EAL Levy Survey The Tech Partnership Levy Questionnaire 2017

6 developing, retiring and amalgamation of Standards. Employer groups are supportive to work collaboratively with the Institute for Apprenticeships to ensure a genuine partnership, which can give the employers the flexibility they need, and, at the same time, maintain the Institute for Apprenticeships ability to ensure government policy is being enacted. Employers across the sectors have identified areas for improvement that would bring significant benefit Approval of New Standards: the approval of new Apprenticeship Standards and Assessment Plans by the Institute for Apprenticeships is too slow and bureaucratic, with delayed release of new Standards. Key recruitment dates in September and October are being missed with the accompanying impact on apprentice starts. The process needs to be simplified and accelerated and employers need more consistency in the application of the rules New Standards: the rules 12 administered by the Institute for Apprenticeships lack the flexibility required for new Standards development in some key technical job roles. The process of approving newly proposed Standards needs to reflect that there will sometimes be a need for a Standard which will have small numbers of starts but which is for a job role that is particularly important to the economy. Typical examples include specialist cybersecurity or visual effects roles and new manufacturing processes that initially start with small numbers of skilled technicians. Similarly, there will be job roles which only a small number of employers would recruit into but where the number of starts would be high. The rules and their interpretation by Institute for Apprenticeships needs to take into account this market reality. Apprenticeships provide the route to develop the creative and technician workforce for the future; a lack of these skills can result in new technology developments leaving the UK Standards Review: the reviews of Standards provides an opportunity for a strategic and evidenced-based look at the Standards landscape in the round and in the context of the Occupational Map and future skills needs of industry. There is a need, for example, to ensure that Apprenticeship Standards align with the development of the T-levels and vice versa. To ensure that there is not a proliferation of Standards, the Institute for Apprenticeships needs to support generic Occupational Standards with flexibility within the Standard 13. There also needs to be a coherence between Standards UK-wide; job specific Standards in England contrast with Frameworks linked to National Occupational Standards in the nations. Our industries work across the UK (and globally) and these variations cause confusion and cost money. 4. Training Provision The technical skills needs of the workforce are changing rapidly and that process is only likely to accelerate as new technologies (automation, robotics, Artificial Intelligence etc.) become more prevalent and play a bigger role in the economy. If the UK can increase the technical skills of the workforce needed today and tomorrow, we can ride the wave of this new technological revolution and benefit from it; if not, we will become victims of it. To achieve this, we will need a world-class training infrastructure to support it Recent revision of the Engineering Technician standard amalgamated 13 separate standards into one.

7 The increase in demand for higher technical skills will inevitably result in upward pressure on education and training institutions; but keeping up with changes in technology is difficult and expensive for FE providers. The situation is compounded by the fact that specialist training often has a requirement for only a small number of trainees, making courses uneconomical. As a result, to the frustration of local employers, many providers choose not to offer niche technical training. The lack of high-quality technical training provision in particular parts of the country is a contributing factor to the entrenched regional disparities in education and skills levels noted in the Industrial Strategy White Paper. A number of key opportunities have been identified which can help to build this world-class training infrastructure, and for the first time, provide a reliable quality-framework across tertiary education and training for the creative, engineering, digital and science sectors Clarity of the landscape: there have been four Acts of Parliament, eight new programmes and five White Papers on FE and skills since The technical landscape is confused by these numerous parallel initiatives from government reforms (Institutes of Technology, UTCs, FE colleges, Academies and 6th Form colleges etc.). Government needs to set out a long-term vision for tertiary education and training provision that embraces diversity and flexibility but brings stability to this landscape Quality: too often training provision is of variable quality and does not meet the needs of employers, with the result that too many students complete courses but are unable to secure suitable jobs this is true for degree courses, apprenticeships and other courses. SMEs do not have the time or resources to identify suitable training; a bad experience can curtail further investment in training. Expansion of industry-led quality frameworks for training provision such as Tech Gold Standard and Pick the Tick for degrees and apprenticeships provide industry guidance on training provision. These frameworks would include a quality mark giving those buying the training the confidence that the course has been accredited by employers as equipping the student / apprentice with the skills needed to pursue and progress a career in industry, thus accelerating the demise of poor-quality provision. Such a scheme to cover online training in digital skills is proposed in the Made Smarter Review which informs a-to-be-announced Sector Deal Specialist training: employers are available to facilitate more involvement in direct teaching of specific subjects and/or to support the existing tutors keeping more up-to-date with fastchanging industry developments. This would require government support in the form of a framework for engagement and funding. The National Retraining Scheme may offer an opportunity to do this and employers in the sectors represented by the authors of this paper would be keen to engage The Tyranny of Small Numbers: there is a lack of resources and inclination within FE, driven by small numbers of learners, to provide training in the specialist technical areas. Regional funding and each LEP wanting to develop local training to deliver their local strategy exacerbates the situation. Employers support the Institutes of Technology but there must be a focus on those specialist skills critical for the future development of industry. Employers should be part of and support the development of an industry-led quality training framework for key sectors, aligned with the future T-levels, quality marked as meeting the needs of employers.

8 5. Upskilling the Native Workforce The Government has made clear its commitment to reduce net migration into the UK to the tens of thousands whilst at the same time continuing to allow those who "benefit us economically, socially and culturally" to come to the UK to work and live 14. Today, the UK economy relies to a considerable degree on importing specialist skills from the EU/EEA: over 10% of the workforce in science and technology are EU/EEA nationals, and 7% for the creative industries. We also rely on importing these skills from further afield: 42% of Tier 2 visas issued in 2016 were for technology-related jobs. Importantly, the majority of these jobs are at the higher skill levels (Level 4 and above). Turning off the immigration tap would damage the UK economy, denying industry access to the creative and technical skills it needs to thrive. However, a partnership of industry and government can ensure a mixed economy in which there is a healthy balance of skilled UK workers, plus high-skilled two-way migration to support a high-performing, technical-based post-brexit economy. We welcome the government s commitment in the Industrial Strategy White Paper to consider the Migration Advisory Committee s conclusions carefully. Employers who depend on highly skilled technical workers see real opportunities in the post-brexit economy for greater productivity and a more socially mobile society, but we need to renew our focus on training to achieve those positive opportunities. To achieve this, the proposal is for a phased approach to re-balancing the economy more towards home grown talent by: 5.1. Utilising existing finances to boost skills training, with a particular focus on upskilling those who are under-represented in highly-skilled technical roles (including women, BAME communities and those from disadvantaged backgrounds), and small and medium-sized enterprises. There are opportunities to utilise the Apprenticeship Levy and revenue from the Immigration Skills Charge flexibly to assist in this, without needing to increase public expenditure. Employers know their current and future skills needs so giving employers more input into the use of these funds would ensure the funds are best used Ensuring a managed shift from imported to home grown talent: any immigration rule changes for highly skilled workers must be linked to a new focus on skills training, as discussed in this paper; given time, this will raise the home-grown talent pool including the current workforce. 6. Conclusion Skills has been identified by the Government as a central plank of its Industrial Strategy. Each of the sectors represented here supports the aims of that Strategy and is involved in separate proposals for Sector Deals. However, we have identified a number of cross-sector skills opportunities, which, if addressed, can support the successful implementation of the Strategy. The purpose of this paper is to set out, as a starting point for discussion, how a partnership of business and government can help to achieve that shared objective. We welcome the Government s commitment to helping business create high-quality, well-paid jobs. We believe seizing the possibilities presented by new technologies across the technical and creative sectors is central to achieving that ambition. The potential benefits are clear: creating more 14 Home Secretary announcing the launch of the independent review into the impact of EU migrants on the UK economy

9 opportunities for all to make the most of their talents, whether through the traditional academic or vocational routes into technical careers; increasing productivity; and setting the UK economy on the path to leading the world in these new technologies. In summary, the issues we have identified and the broad approaches of the solutions we have proposed are:- Issue Approach to solution Benefit Careers Information, Advice & Guidance Supporting the implementation of the Careers Strategy, including agreeing the practicalities of how employers can get involved on the ground in schools and colleges across the country School students better able to make informed decisions about career options and the routes into those careers (vocational as well as academic) Apprenticeship Levy Apprenticeship Standards Training Provision Upskilling the Native Workforce Greater flexibility within existing policy to utilise apprenticeship funding, especially for SME/supply chain skills A streamlined approvals process which takes into account the dynamic nature of the marketplace A new focus on ensuring highquality training provision is available across the country and in newly-emerging and niche technologies Managing the shift from importing high-level skills to more home-grown talent Higher take up of apprenticeships, particularly by SMEs More employers, especially, technical and creative SMEs and microbusinesses, willing to recruit and train young people and upskill existing staff given the fast-changing needs of their businesses Helping in the drive to support skills growth in established and in new technologies, particularly outside London Enable a reduction, over time, in dependency on imported skills, and giving more opportunities to UK workers The opportunities identified in this paper and the proposed approaches are a result of consultation with our members and employers within our sectors, and a mix of further primary and secondary research.

10 We stand ready to help the Government to develop these proposals further, to build a country that works for everyone, and ensure that post-brexit UK truly is Opportunity UK. Karen Price Ann Watson Joanna Woolf Seetha Kumar The Tech Partnership SEMTA Cogent Skills Creative Skillset