Business leaders are urging the new government to prioritise education and skills in its renewed industrial strategy, citing concerns that too much talent is being lost to other countries.
According to recent research by PwC, there is a strong consensus that an effective industrial strategy is essential for economic growth. Eight in ten (81%) UK business leaders believe an industrial strategy is crucial, while seven in ten (68%) feel the UK lags behind competitor countries in promoting growth through its skills system.
Over six in ten (65%) business leaders think the UK is losing too many talented people to other countries, exacerbating the challenges of sluggish economic growth and slower productivity growth compared to other G7 economies. PwC’s report suggests that addressing these issues could add £650 billion to the UK’s Gross Value Added (GVA) by 2035.
PwC Research Highlights Skills and Education Concerns
The PwC research, based on over 60 one-to-one interviews with senior business leaders, policy bodies, and trade associations, along with a quantitative survey of 1,200 businesses, highlights critical concerns regarding the UK’s skills system. Despite the UK’s globally-renowned higher education institutions, many business leaders feel the country is falling behind in how its skills and education systems promote growth.
More than half (53%) of the surveyed businesses rank skills, education, and talent among the top three most important components for growth, with over a quarter (27%) ranking it as their most important component. Among those prioritising these areas, nearly eight in ten (79%) believe improving the UK’s skills system will require government action or investment. Additionally, 73% think businesses themselves can significantly impact the level of available skills in their sectors.
Impact of Improved Skills Policy
Of the businesses prioritising skills and education, over a third (37%) predict that better government policy and investment would allow them to expand their workforces. Seven in ten (70%) of these businesses expect their workforce size to grow by over 10%, and nine in ten (91%) foresee an increase of over 5%. Additionally, over a third (38%) of these businesses would increase their investment levels, with seven in ten (71%) anticipating an investment boost of more than 10%.
Rachel Taylor, Government and Health Industries Leader at PwC, commented on the findings: “The new Government has a full intray but clearly for business leaders stability and certainty through an industrial strategy, which prioritises skills, is key. Global markets for investment, skills, and supply chains have never been more competitive, and the UK increasingly finds itself competing with countries where governments take a more active role in supporting the private sector. Achieving long-term economic growth will ultimately require joined-up policy making and investment at both national and local levels.”
Shaping the Future of Industrial Strategy
While eight in ten (81%) UK businesses see an industrial strategy as essential for economic growth, they are calling on the government to establish the overall framework for growth rather than focusing on industry-specific policies. The report also highlights the need to build trust and engagement among businesses, with a quarter (24%) of business leaders feeling that past governments have not sufficiently listened to business when designing growth-promoting policies.
Quentin Cole, Sponsoring Partner of Framework for Growth at PwC, stated: “Compared to other G7 economies, UK economic growth has broadly flatlined since the pandemic and is struggling to return to its historic levels. It’s no surprise there’s a growing clamour for a joined-up UK growth strategy, to break down the barriers to growth and productivity. The call from UK businesses for a stable environment to invest, access talent, and grow is equally important.”
Economic Potential and Priority Areas
PwC’s analysis projects a potential £650 billion uplift to UK GVA by 2035 if the UK can improve its performance across key growth enablers. The business leaders identified three primary areas for improvement: skills and education, digital transformation, and infrastructure and planning. Enhancing the skills system alone could result in a £230 billion increase, while digital transformation and infrastructure improvements could contribute £65 billion and £355 billion, respectively.
The research indicates a strong appetite among business leaders to collaborate with policymakers to create a shared vision and conditions for growth. A successful industrial strategy will require continuous engagement and innovation to leverage the UK’s industrial and sectoral strengths across its regions.
