South West Regional Skills Enterprise and Employment Analysis 2007/2008

Final Report

4.3 Future Demand for Skills

In assessing the scale and nature of future employer demand, we can look at the Working Futures(20) analysis conducted on behalf of the Sector Skills Development Agency (SSDA). This gives us an insight into changes forecast up to 2014. Whilst forecasting data needs to be used with great caution, it can provide an indication of where future trends lie and what might need to be done to prepare for them.

4.3.1 Future demands and priorities

To determine future skills priorities, we need to look to where future changes are likely to lead to increases in demand for certain types of skill. This indicates the occupations and sectors where the supply side will need to keep pace with these developments if skill shortages are to be avoided in the future. It is important to note that both expansion demand and replacement demand are critical aspects of this analysis.

Continued structural change in the economy will see big shifts in the mix of employment in different sectors at national level. The main growth sectors in terms of projected employment (2004–2014) are:

• most parts of the marketed service sector, especially in business and miscellaneous marketed services;
• growth is also expected in non-marketed services (especially in education and health).

Declining sectors in terms of projected employment include:

• the primary sector (including utilities);
• most of the manufacturing sector.

The need to replace staff will also result in a large demand for employees, even in those parts of the labour market experiencing job loss. This will result in significant skill demand in declining sectors and occupations as well as the 'winners'. The net changes (expansion demands) therefore only tell part of the story.

Table 6: Occupations by expansion and replacement demand

Source: Working Futures 2004-2014

In most of these occupations, there is strong expansion demand and strong replacement demand. For those employers facing such demands, there is likely to be strong competition for the skills required, especially where these are sector-specific.

In many other occupations there is weak (or even negative) expansion demand but quite strong replacement demand. This includes many skilled trades and semi-skilled operatives, often with sector-specific skill needs. Meeting such needs can prove difficult, especially where employers are attempting to recruit young people into an occupation or industry perceived to be in long-term decline.

4.3.2 Expansion demand in the South West

Overall, 101,000 new jobs are expected to be created in the region to 2014. Other key messages for the South West (21) are as follows:

Table 7: Expansion demand in the South West to 2014

Source: South West LSC Strategic Analysis, referencing Working Futures data

4.3.3 Replacement demand in the South West

In addition to the new jobs that will be created towards 2014, it is also important that we examine the effect of replacement demand on occupations. This demand equates to 1,022,000 jobs in the South West. The graph below clearly demonstrates that replacement demand is very large which means that the net requirement for skills is significantly greater than if only expansion demand is considered.

Figure 6: Structural demand and net requirements in the South West by occupation, 2004-2014 (Click image to open in new window)

Source: Working Futures 2004-2014

4.3.4 Relationships between jobs and skills requirements

The Working Futures analysis states that in terms of the demand for qualifications, between 2004 and 2014, there will be a shift towards higher level qualifications and in particular towards the importance of Levels 5, 4 and 3; and a decline in the need for Level 2 and 1 qualifications.

In the South West, for new and replacement jobs to 2014, approximately 43% will require qualifications at Levels 4 and 5. A further 27% will require Level 3 qualifications whereas, according to forecasts, only 17% will need qualifications to Level 2 and 14% to Level 1. This still represents a large volume of people.

The recent Leitch Report proposes the introduction of stretching targets for 2020, which includes ensuring that:

• 95% of adults have basic skills;
• more than 90% of the workforce are qualified to at least Level 2;
• there is a shift in the balance of intermediate skills from Level 2 to Level 3 qualifications; and that more than 40% of the adult population have qualifications at Level 4 and above.

The Government is already investing in skills to deliver the current set of skills targets. Achieving these targets is a precondition for any higher ambitions set out by Leitch. The Government will be considering how best to achieve the Leitch ambitions and implement its recommendations, alongside the level of resources it will allocate to them, as part of the 2007 CSR process(22).

Conclusion

Whilst the South West has a highly qualified workforce, projections of future demand show that supply will need to increase at intermediate and higher levels.

Graduate apprenticeships may also be a way forward.

(20) R Wilson et al, Working Futures: 2004-2014, National Report, SSDA, February 2006
(21) Taken from South West LSC Strategic Analysis 2007-8
(22) Pre-Budget Report 2006, HM Treasury