As part of our opinion series for National Apprenticeship Week, our Policy Delivery Director Mark Hilton sets out the measures needed to bring down London’s unemployment rate.
The start of National Apprenticeship Week today serves as a reminder of both the transformational impact that further and higher education can have on people’s lives and the acute challenges facing those trying to access opportunities in the current jobs market.
The UK unemployment rate surpassed 5% in the three months to November to reach a four-year high. Here in London, the picture is even more concerning. Despite having the most educated workforce in the UK, the capital also has the country’s highest regional rate of unemployment, which currently stands at just over 7%.
And it’s young people who are bearing the brunt of a tightening jobs market, with around one in five Londoners aged 16 – 24 currently out of work.
The causes behind these trends are numerous and complex. The Government’s decision to increase employer national insurance contributions (NICs) last year against a backdrop of sluggish economic growth and global uncertainty has caused many firms to put the brakes on hiring.
The impacts of that choice were highlighted by a study from the National Institute of Economic and Social Research this week, which shows that the cost of hiring an entry level worker jumped by more than 10% last year.
An adjustment to the Growth and Skills Levy from April, which will see the Government drop its funding for additional training costs among firms that have exhausted their levy allocation from 95% to 75%, will not help matters.
In addition, the number of young people seeking support with physical and mental health challenges has soared since the pandemic, a challenge that will be a focus for former Cabinet Minister Alan Milburn’s review into the causes of youth unemployment.
At the same time, skills shortages are persisting. When we surveyed firms across the capital as part of our leadership of the London Local Skills Improvement Plan (LSIP) last year, we found that eight in ten had live vacancies, and close to half were struggling to fill them. A lack of candidates with the right skills was the most commonly cited barrier to recruitment.
Though AI may be beginning to displace some entry-level roles, rising employment costs, economic uncertainty and skills gaps are the fundamental drivers of London’s jobs challenge.
How can that challenge be addressed?
The Government has rightly made upskilling central to its growth mission, with a pledge to put technical and vocational education on a par with academic qualifications backed up by an ambitious £1.5 billion investment in the Youth Guarantee and Growth and Skills Levy.
Taken together, the additional support provided through the Youth Guarantee coupled with much-needed reform of the apprenticeship levy system have the potential to deliver a real impact, provided they’re rolled-out in the right way.
The focus on supporting young people through the emerging Growth and Skills Levy model is positive, but the pace of change is too slow. Simplification of the system must be accelerated to improve the appeal of apprenticeships to employers.
More broadly, we need to see Ministers move further and faster in their endeavours to tackle rising unemployment, starting with a comprehensive review of how the hike to employer NICs is impacting the career paths of young people. With economic growth in the doldrums, the Government should be helping, rather than hindering, businesses seeking to hire and invest.
With regards to education in schools, our LSIP consistently shows that employers want candidates with a mix of transferable skills, like communication, teamwork and resilience, alongside digital and AI capabilities. A national curriculum more attuned to developing this combination of qualities is a must.
Added to that, we need a greater focus on collaboration between businesses, educational institutions and policymakers when it comes to bringing down London’s unemployment rate.
Historically, too many qualifications on offer to young people have not met the skills requirements of businesses, a fact highlighted by figures from the Centre for Social Justice which show that more than 700,000 graduates are currently out of work.
Through our London LSIP, we address this mismatch by bringing employers and training providers together to identify the capital’s skills gaps and set out how they can be closed.
From immersive labs for engineers, to hands on learning experiences for health care professionals, to establishment of a dedicated retail skills hub, the LSIP is behind new opportunities for young people across a host of vital sectors.
The plan is also informing delivery of the Greater London Authority’s Inclusive Talent Strategy, which has a whole system focus – encompassing skills, employment, inclusion, further and higher education, and immigration.
The strategy has committed to adopting a key LSIP recommendation in its pledge to bring together “London’s skills, employment, health and careers services” through “establishing a new jobs and careers service for Londoners, providing a clearer pathway of progression.”
It’s also been encouraging to see the GLA moving forward with the creation of Sector Employer Boards to inform the development of training initiatives, in line with LSIP principles. The GLA is rightly drawing on international best practice in this area, including the Skillnet programme in Ireland, and we look forward to it continuing to do so as its Inclusive Talent Strategy is rolled out.
Collaboration should be the watchword for this year’s National Apprenticeship Week. The more we can bring businesses, educators and policymakers together to address skills gaps, the more we can create the opportunities needed to tackle unemployment across the capital and beyond.