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London Economics Shines Light on Skills Gaps Holding Back UK Productivity


Leading economics consultancy London Economics has analysed the Employer Skills Survey to identify and quantify how shortfalls in skills are impacting UK firms through loss of business to competitors, delayed development and increased operating costs.

“This detailed analysis of the consequences of skills gaps, according to type of skill, size of skill gap, business sector, size and geography is allowing Filtered to increase the precision of its prioritisation of learning content for our corporate clients” said Chris Littlewood, Filtered’s Chief Scientific Officer. “Being able to link skills gaps to tangible outcomes, like deals lost to the competition, brings home the urgency of the problem – it’s a productivity imperative not a productivity puzzle.”

London Economics conducted both descriptive and econometric analysis of the Employer Skills Survey 2015, which is based on over 90,000 interviews with firms of all sizes and sectors across the UK. The resulting correlations have been incorporated into Filtered’s globalfilter learning recommendation engine, prioritising learning content recommendations with a likely higher impact on client firm’s productivity.

Sophie Hedges, the lead economist undertaking the analysis at London Economics, said

“the new analysis of the ESS illustrates both the incidence and the adverse impact on firm-level performance associated with a range of different skills gaps. The analysis also provides a strong rationale for firms, irrespective of their size, to invest in skills to rectify the potential negative consequences.”

Insights include:

  • Skills gaps in reading and understanding increases the probability that the establishment will lose business to competitors by 6.2 percentage points compared to an establishment with no skills gap in reading and understanding.
  • In fact, reading and understanding consistently appears as one of the strongest drivers of negative firm outcomes.
  • For SMEs, the incidence of skills gaps increases with firm size (tiny firms tend to be appropriately skilled, but as firms get bigger matching skilled resource to requirements seems to become harder). (Small firms report an incidence of skills gaps of just 2%, compared to 7% for firms with more than 250 employees.)
  • But when skills gaps do occur in very small firms, they are more likely to have a major impact (a major impact was reported in 23% of firms where skills gaps were identified).
  • Gaps in IT/computer literacy, basic numeracy and complex numerical skills also increase the probability of increasing workload for other staff (by 6.4, 5.2 and 4.1 percentage points respectively).

Filtered are making the research freely available in the hope that it provides a platform for further innovation. Get in touch if you are interested in access or collaboration.


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Chris is a digital marketing and publishing whizz by trade, having worked alongside the Automotive, Information Security and Software Asset Management sectors.

Specialising in data analysis and social media, he combines an analytical approach with a creative flair to achieve the best results. With a keen interest in Technology and Politics, Chris is constantly on the look-out for the latest stories around change and innovation.

As a lover of all things innovative, he has developed a keen eye for spotting the latest trends and hot topics. He sources and reads the latest news and thought-leadership articles from the world of recruitment before sharing them with the social media population.

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