Skills and training: A sector shaping our future

Earlier this year I hosted a roundtable on how we can prepare for the next generation of critical skills. The expert panel explored the emerging trends that will shape the next generation of the workforce, and debated if such training programmes are being prioritised in the right way.  

The deals landscape in the last few quarters has been tumultuous, but our own M&A analysis shows that activity in the skills and training sector has been maintained, and deal volumes were up 17% in the first half of 2024 versus the last half of 2023. While other sectors were impacted by uncertainty around the General Election, even before it was called, skills and training proved more resilient as both major parties have been consistently clear that enabling organisations to access talent is a priority. The uncertainty exists around which skills we need. The constant innovation in digital and data makes the demand for relevant skills clear, but sustainability or ‘green’ skills are also attracting a lot of attention. There’s also an emerging narrative around the distinction between blue-collar and white-collar skills. The priorities for the sector are preparing for demand in skills that employers don’t know they need yet and advocating for governments to adapt to current challenges.

How is the sector prioritising around different skills gaps?

There are so many areas where organisations don’t have the right skills to achieve their goals that it can be difficult to know where to invest. Employers are excited about AI. They also want people who can build relationships, as well as stronger leaders. Tech companies want to train people to efficiently manage people, and learning and development organisations want managers who have data skills. Knowledge isn’t enough. Universities are teaching management skills to lecturers. That intersection between technical and human skills is the magic space – giving people skills and the confidence to use them, and to continue to develop them in the next 20 years. That’s why we’re seeing more and more organisations offering digital leadership programmes, for example.

Green skills

The ‘green skills’ story is at a much earlier phase. There’s a lot of excitement around it, but in practice it’s quite immature. Big employers are starting to create agendas. The demand for them is only going to accelerate. For example, currently, 99% of boiler fitters can only install gas boilers – from 2025 it will be illegal for developers to fit new builds with gas boilers. For M&A, an offering related to ESG will make a provider more attractive to investors.

Blue-collar and white-collar skills

In Q1 there was a clear shift towards investment in companies offering ‘blue collar’ skills training; approximately 60 / 40%. It’s easy to focus on ‘high-level’ skills, but people also need opportunities at lower levels. A point that’s often missed is that level 1 or 2 programmes can get people to a place where they can move up to studying at levels 3 or 4. It’s sometimes floated that the Government should stop funding programmes at level 6 or above, to prioritise people that may not have experienced a further qualification post-school, but we need to remember that when people use training at this level to move on to new opportunities, they create space for others. We need to use the apprenticeship structure as a funnel that draws people up. That should be a key objective for the sector.

Finally, it’s not only what development they’re offering that the sector is thinking about though. It’s also how they’re delivering it. Training providers need to be leveraging technology as much as their clients to make learning more experiential. The human element also has a place there too, so that learners can access coaching and mentoring.

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What can the new Government do?

The Labour Party is keen to invest in skills, but it’s approaching it from the perspective of social inclusion more than growth. You can have inclusion and growth. There are 900,000 people not in employment, education, or training (NEETs), so levelling up should be a key part of the thinking. Employability programmes in deprived areas shows the impact it can have – after a few years you can take someone and put them in a highly-paid technical role. If you want to create opportunities at levels 1 and 2 you need good managers, which means supporting training at levels 6 and 7.

Of course, in some areas it’s much harder. Some much-needed roles, for example, in care homes, are seen as jobs more than careers because the opportunities for progression just aren’t there. The solution for attracting people into these roles really comes down to the Government reviewing apprenticeship funding bands  to increase attraction to these critical industries.

The outlook for the sector

Government support, especially around regulations, is critical, but the demand for skills is so great that it’s difficult to imagine the sector’s fortunes changing any time soon. When we look at deals in this space we need to think three to five years ahead. Horizon scanning for investment priorities should be focused on which emerging skills will be critical in a few years’ time. That’s how as well as adding value to businesses in the sector, owners of independent training providers can also help our wider economy grow.

For more insight and guidance, get in touch with Victoria Giles.