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20 April 2020updated 09 Sep 2021 3:25pm

Why skills are vital for post-Covid-19 recovery

We should be protecting apprenticeship, skills and education budgets to offer furloughed and unemployed workers new opportunities.

By Margot James

Cataclysmic events like the global pandemic that now threaten all of us occur rarely, thankfully.  But for the generations who live through them they change the world forever. As we look to life after the coronavirus, it is clear that issues and challenges that preceded this crisis will be galvanised and accelerated by it. Now is the time to address the problems that societies and governments have ducked during the good times, with the same sense of purpose uncovered to tackle this virus.

We can take heart from what has already been achieved.  Companies and people have come together to develop new ventilator prototypes that have been approved and manufactured from scratch in less than two months.  Nightingale hospitals have been built, kitted out and staffed in even less time than that.

That this country possesses an entrepreneurial spirit has always been clear to me. I led the growth of a business I started myself, I served as minister for small business and I have just joined an incredibly entrepreneurial institution, WMG, a collaboration between the University of Warwick and business partners, large and small, who are research driven and striving to be best in class. The UK will need that “can do” mentality even more as it starts to emerge from the crisis.

It is impossible to predict the full impact of coronavirus on society but the economic consequences are becoming clear.  The Office for Budget Responsibility (OBR) predicts a 35 per cent single-quarter hit to GDP and the largest deficit since 1945.  A study by McKinsey suggests contraction in commercial aerospace of 44 per cent, in oil and gas of 48 per cent and in automotive of 32 per cent.

In the short term, the government has acted to protect workers. The British Chambers of Commerce estimates nine million workers are being furloughed under the government scheme. These are largely in businesses, from food service to manufacturing, where it is difficult to work from home, and where wages are often low.

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Ultimately a vaccine will be our liberation from coronavirus. Until a vaccine is available, mass testing, social distancing and strict hygiene policies should permit businesses currently locked down to gradually re-open. Either way, when the immediate health threat from Covid-19 declines, without a clear plan for recovery the OBR estimates there will be two million unemployed, with devastating consequences.

Most urgently, the UK needs to offer support for the furloughed and those at risk of unemployment, seizing the opportunity to invest in their training and skills, helping them return to the workforce with higher productivity.

A skilled workforce, key workers and communities matter now more than ever. We should be protecting, expanding even, apprenticeship, skills and education budgets to offer furloughed and unemployed workers new training and skills opportunities.

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We need a series of “lifeboat projects” which utilise and develop further the skills of our workers to help businesses be ready for a return to growth. These could include support for short courses that help workers develop new skills while on furlough, increased funding for in-work learning and retraining, and offering apprenticeships and training opportunities to school and university leavers while firms do not have the capacity to take on new workers.

There is still money languishing in the apprenticeship levy pots of large employers (Read: English firms fail to spend £400m of apprenticeship funding). The Treasury needs to relax the rules on how this money can be spent, allowing firms to use it towards the funding of degree apprenticeships and short-term training. 

Well before coronavirus we had serious skills shortages in areas like technology, engineering and construction, with particular skills deficits in poorer regions and sub-regions. A 2018 survey by Lloyds Bank found that 5.4 million people of working age do not have the full range of basic digital skills.  The UK could boost productivity by up to 5 percent if we reduce our skills gap to OECD best practice levels.

This underlines the next priority. We need to demonstrate a full commitment to the levelling up agenda. That means creating jobs by investing in transport infrastructure, in healthcare and in housing. This way we can tackle regional inequalities and preserve manufacturing, technology and engineering businesses so their capability is retained for future growth.

Finally, we need to double down on plans for more investment in innovation and R&D. Britain has the strongest research base in Europe by some distance. But the fruits of that advanced technology are not dispersed as much as they should be across industry and public services. The government must help spread the research revolution in the material sciences, automation, electrification, robotics, 3D printing, the Internet of Things and data analytics throughout manufacturing and the service economy.

Coronavirus will probably have caused the biggest shock to our economy since the Second World War. The process of rebuilding the economy, and livelihoods, will be difficult. It is essential that people have the skills to thrive, and that companies are supported so they can contribute to a cleaner, more secure, and better connected future once the present crisis has passed.

Margot James is executive chair at Warwick Manufacturing Group. Previously she served as minister for digital and the creative industries and minister for small business, consumers and corporate responsibility.