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3 Skills Strengths and Needs

This chapter briefly summarizes the evidence base set out in Annex A and B of this document.

This can be found in full at skillslaunchpad.org.uk/skills-strategy/

Overview

Located in the peninsula of the South West of England, the Heart of the South West is one of the country’s largest LEP areas. Its economy is broadly balanced, and while many of its industrial strengths capitalise on its rich endowment of environmental assets, it is has high-tech specialisms in aerospace, photonics and ship building. Strategies in place to benefit from on the golden opportunities afforded by marine, nuclear, aerospace and advanced engineering, data analytics, health and care and rural productivity. Its economic strategy envisions doubling the size of the economy but with an emphasis on clean and inclusive growth.

In order to meet this challenge, the HotSW will need to unlock the region’s productive potential over the next decade, whilst creating quality employment opportunities for its residents in the broader context of Covid-19 recovery and recalibration of the UK’s trading relationship with the European Union. Skills will be integral to realising these ambitions. Covid-19 has had a disproportionate impact on parts of the area, due to the HotSW’s heavy reliance on tourism, hospitality, and retail activity. Productivity is also traditionally low by national standards due to a combination of factors relating not only to skills, but business structure and innovation. Recovery and growth will therefore involve maximising the economies of industrial clusters and improving leadership and management skills so that local businesses and organisations are more efficient, fully utilising the capabilities of all staff, and adopting the latest technologies and management practices.

Key Economic Features

  • A mixed geography The Heart of the South West is one of England’s most geographically diverse LEP areas, encompassing significant rural and coastal areas, alongside core urban centres.
  • Low productivity overall, but significant economic diversity across the HotSW’s geography In 2018, GVA per head in the HotSW was approximately 18% lower than the national average. This however disguises substantial differences within the area, with wages and productivity per head in Exeter roughly the same as the national average in 2019, whilst wages in Torridge were approximately 20% lower than those in Exeter.
  • A small business / self-employed economy As a predominantly rural area, 98% of the Heart of the South West’ Businesses were either small or micro organisation in 2020, with only 1 in 5 businesses in the HotSW having a turnover above £50,000 per annum. Similarly, roughly 18% of the population in the HotSW were self-employed in 2020.
  • A shrinking working age population The HotSW’s working age population is currently ageing around a third faster than the rest of the UK, with around one third of the Heart of the South West’s overall population already over the age of 65 in 2019, compared to just 6% of the population between the age of 16-19.
  • Significant clusters of localised deprivation are often disguised by proximity to more prosperous communities The HotSW had above average numbers of wards within the bottom 20% nationally in 2019, notably concentrated within Plymouth, Torbay, Northern Devon, Exeter and Western Somerset, as well as across wider rural and coastal locations.
  • High overall levels of economic activity and those of working age in employment, but low levels of average pay, higher proportions of individuals working within lower value sectors, and a lower proportion of the working age population overall undertaking a higher level role Historically, the Heart of the South West has benefited from above average economic activity rates, with the average only falling below 77% once in past 25 years before the onset of Covid-19. However, gross weekly pay for full time workers in 2019 was roughly 11% lower than the English average.
  • A mixture of skills and education capacity The Heart of the South West is home to 4 universities, 11 Colleges, 160 mainstream secondaries, and over 300 independent training providers. It is also home to a range of specialist provision, including its Institutes of Technology, the National College for Nuclear and additional research capacity, and facilities covering specialist skill development within the agricultural, marine, engineering, digital, construction and environmental science sectors.
  • Difference in physical, financial and virtual access to learning Whilst the Heart of the South West benefits from reasonable achievement levels overall, access to learning continues to be influenced across the area by a range of tangible and intangible barriers. Mixed transport and public transport access to Centres of learning; significant differences in broadband and digital capacity and infrastructure availability; and challenges around the affordability of learning itself for those form a more disadvantaged background continue to be important differentials in relative performance across the HotSW.

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Skills Demand

Skills demand within the HotSW has been relatively consistent over the past five years. Top sectors have included manufacturing and engineering related occupations, health, construction, logistics, professional and financial services roles, and hospitality, leisure and retail opportunities. In the past three years, health and social care, hospitality and leisure, and engineering / advanced manufacturing have been areas of enhanced pressure, reflecting patterns in demographic change, local sector growth and changing economic patterns and habits.

Summarising the current broad trends across the HotSW economy, demand can be broadly pooled into three areas;

  • Sectors with an ongoing and cyclical recruitment and skills need These include the skilled trades, care sector, leisure sector and across the generic service sector.
  • Sectors with ongoing occupation specific demand, but who generally don’t have a wider challenge around recruitment These are most commonly found within elementary occupations (skilled trades), sales and customer services (finance, managerial posts), associate professionals (project management, finance) and hotels and restaurants (chefs, management).
  • Localised gaps within specialist occupations These include demand within professional occupations, transport and storage, information and communications, construction, manufacture and production, and specialist health and social work roles within the HotSW.

Focusing upon sectoral demand, it is currently anticipated that the following core sectors will remain areas of specific heightened need / demand into the medium term:

  • Health and social work are currently predicted to create more ‘new’ jobs than any other sector locally over the next 10 years particularly among caring personal service occupations but also health professionals. The existence of skills shortages and gaps within the sector now, suggest that encouraging more adults and young people to follow careers in health and care should be a priority.
  • Professional and support services and information technology are predicted to be key source of job growth locally over the next 10 years underpinning demand for a range of mainly high-skilled occupations particularly in the former. Within this, Nesta (The UK’s innovation agency for social good) predicts strong demand for skills groups related to data  engineering, IT security operations, market research and app / web development.
  • Accommodation and food and arts and entertainment, along with other services and wholesale and retail trade were also predicted to create new opportunities over the next 10 years. The extent to which these opportunities will be realised will depend on how quickly these sectors recover from the pandemic and the extent to which consumer preferences and business models within these sectors evolve as a consequence.
  • Construction, a sector that currently has the second highest redundancy rate in nationally predicted to increase employment locally. Most of the increase is anticipated to be at professional and associate professional and managerial level, although demand for construction trades will also increase. The fortunes of the construction sector tend to track those of the wider economy, these jobs will depend on the impacts from exiting the EU and the broader recovery.
  • Production, manufacturing and Science, Technology, Engineering and Math (STEM) based employment is currently expected to be expected to be an area of significant replacement demand, though overall job numbers are expected to fall. For example, the total requirement for science, research, engineering and technology professionals and associate professionals is expected to increase by 19,000 and the requirement for skilled trades by 10,000 over the 10-year period covered by the projections, despite small reduction in overall job numbers.

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With regards wider demand factors, the past year has seen a significant shift in demand patterns across the HotSW as a result of Covid-19. Whilst it is still too early to fully describe the long-term labour market impacts of the pandemic, and the consequences for local labour demand, economic forecasts are currently pessimistic around employment growth nationally this year or next, with consequences for both local demand, and particularly for young people.

In the short-term, skills demand in the HotSW will depend on how lockdowns and any subsequent restrictions affect commercial activities and ultimately business survival. Redundancy rates and take-up of Government job retention support suggests that the pandemic is disproportionately affecting demand for customer-facing sectors such as arts, entertainment and recreation and accommodation and food services but also construction and manufacturing. Demand for occupations related to health and care, and the skills implicit within these, appears strong. It is also currently predicted that employers will identify a deficiency or need to improve general and industry specific digital skills across the workforce as a result of recent events. The pandemic is likely to have further increased the need for digital competencies and enhanced leadership and management skills.

Longer-term, it is anticipated that skills demand will continue to be shaped by mega trends such as technological change, globalisation, climate change and demographic change with the pace of these changes potentially accelerated due to the Covid-19 pandemic: for example, increased remote-working and online shopping. It is perhaps too early to call whether changes in consumer preferences and work design will persist over the longer-term, however, the broad direction of travel is unlikely to change. Employment projections for the Heart of the South West predicts that while there will be a net requirement for workers with qualifications at all levels from Level 2 upwards, expansion demand is concentrated solely among occupations requiring for higher education qualifications and particularly
first degrees.

In addition, it is anticipated that new roles will be created by a mixture of other trends and opportunities including:

  • Ongoing technological advances, notably around clean growth and automation.
  • Existing businesses seeking to integrate non-traditional sector roles (including data engineering, IT Security, market research and app/web development) into their activity.
  • New opportunities created through enterprise and self-employment, with entrepreneurial behaviour traditionally increasing after large scale economic shocks as individuals seek to adjust and find new options.

Skills Supply

The HotSW’s education system overall is effective in ensuring that the majority of young people attain a Level 2 qualification by the age of 19. In 2019, GCSE and A Level achievement for those aged 16- 19 levels in the HotSW was roughly equivalent to the national average (though with significant local difference), with the area benefitting from a Level 3 achievement level for non-A level qualifications roughly twice that of the national average. Level 4 and above achievement (amongst adults) was also roughly equivalent to national averages. Notably, the Heart of the South West also had some of the Country’s highest levels of apprenticeship activity and achievement (notably around Plymouth and Exeter).

However, attainment at Level 2 by age 19 has fallen in each of the last four years within the area, with evidence suggesting that disadvantaged pupils and those with a barrier to learning are considerably less likely to achieve educationally than their peers. National studies suggest that many of those that do not achieve by age 19, do achieve Level 2 or 3 by age 25, with qualitative feedback from providers and employers suggesting this is also the case in the local area. These ‘second’, or even ‘third’ chance opportunities are crucial within the HotSW for individuals who did not achieve formal qualifications at school or college.

Those that remain in education in the HotSW tend to achieve well and acquire qualifications in subjects valued by employers – as evidenced by better-than-average employment rates. Rudimentary assessment of labour market fit suggests that there is an opportunity, to encourage more learners to access courses at all levels, in particular focusing on subjects allied to information and communication; business administration and law; health, public services and care (including teaching); and engineering and manufacturing technologies. This needs to be underpinned by access to good quality careers information, advice, and guidance. Progression into higher education in the HotSW though remains low when compared to peer areas, with graduate retention remaining a specific challenge as it is for many areas outside London
and the South East. The ongoing development of industrial clusters seeks to support this issue, enticing experienced workers into the area with the possibility of opportunities beyond the ‘destination job’. While salaries are lower than the England average, the Heart of the South West performs well on various quality of life metrics including house prices (though these can vary considerably) and environmental quality, which also seeks to reinforce local appeal. However, rates of progress here remain slow.

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Matching supply and demand

There is some evidence of a mismatch between skills supply and demand within the HotSW. In 2019 for example, 25% of those completing a Level 3 qualification locally were in professional services, finance and business disciplines, whilst a further 19% were in service enterprise activity (which includes beauty and personal care, customer service and other small business centric qualifications) or sports and leisure qualifications. This is despite these sectors making up just 13% and 1% of the economy respectively. Alternatively, only 1% of qualifications were within logistics and retail qualifications (16% of employment), and 13% in health and social care (approximately 20% of employment and current vacancies).

As such, the Chartered institute of Personal Development ‘(CIPD’) recently described the Heart of the South West as being in “skills surplus”: A situation of high supply overall, but against a low demand for skills. Deeper analysis of the area suggests that the picture is rather more complex than this simplistic summary suggests, with the need for a nuanced understanding of local skills demand and labour markets across the LEP’s varied economy geography. In general, the area could perhaps be better described as below:

  • High supply and high demand for skills in the Exeter Travel to Work area (i.e. “High-skills equilibrium”)
  • Lower supply and lower demand for skills across Somerset, Plymouth, and Torbay (i.e. “Low skills equilibrium”); and
  • High supply, but lower demand across parts of Devon (i.e. “Skills surplus”).

Ensuring that this mismatch between supply and demand is addressed, as well as ensuring that provision in growth sector and low supply, high demand areas is prioritised forms a central theme of the rest of this report.