South West Regional Skills Enterprise and Employment Analysis 2007/2008

Final Report

4.13 Participation and provision

4.13.11 Employer investment in training

Training supported or supplied by employers is, of course, a major input to the development of skills needed by the economy.

However, assessing the nature and scale of employer investment in training is extremely difficult. The Leitch Interim Report suggests that estimates for employer expenditure on training in the UK differ between surveys. Annual expenditure in the Learning and Training at Work (LTW) survey, now five years old, is £23.5 billion. The NESS gave a much lower figure for 2004 of £4.4 billion. The Learning and Training at Work estimate is higher than the NESS estimate as the survey is far more detailed than NESS and includes estimates of indirect spend on training, such as employee wages. The LTW survey suggests that, of the £23.5 billion spent, 44%, around £10.3 billion, is spent on the wages of employees while in training during work hours. Overall, direct spend on fees to external providers of training is an estimated £2.6 billion (11%) of the total estimated spend.

At the regional level, we can look at NESS 2005 which allows analysis of a number of aspects of employer training within the South West:

• The extent to which employers have an ‘infrastructure’ for the planning and budgeting of training;
• How many and which employers actually supply or support training?
• How much training they supply and how much they spend on training?
• Which types of worker get training?
• The extent to which training is directed towards recognised qualifications.
• Training for induction and Health and Safety reasons.
• Employers’ use of external training suppliers.

The survey shows a positive proportion of establishments providing training for staff, both in the South West and across England. In both these areas, the proportion has risen (though more sharply in England, so that the region is now typical of the national picture):

Table 13: Percentage of Employers supplying training in the past year, South West and England, 2003 and 2005

Source: NESS 2003 and NESS 2005

This picture of growth in employer training is consistent across the region, with all the South West’s sub-regions, except Somerset which was stable, showing some advance.

In terms of sectors, the higher proportions of training, where 80% or more of establishments supplying training are in sectors where much activity is publicly-funded (and where establishments are frequently large ones). However, training is also frequent in some other sectors, financial services, for example, and is also fairly high in industries (‘Cogent’ and ‘Energy and Utility Skills’), where safety is a major concern. In the latter case, it can be noted that the LSC has withdrawn from the funding of training required by statute. It would be anticipated, however, that such training, because of its ‘statutory’ nature, will not decline in volume.

At the other end of the scale, the proportion of firms supplying training in the construction sector (a sector with relatively high levels of skill shortages and gaps) is below average for the economy as a whole.

There is also a strong association between the likelihood of an establishment supplying training and its size, with the smallest being the least likely to train staff.

Table 14: Percentages of employers supplying training in past year, by sector, South West, 2005

Source: NESS 05

Table 15: On and off the job training by sectors, South West 2005

There are three groups of firms in respect of the relative amounts of training they supply:

• Most commercial sectors (in land-based industries, construction, manufacturing, vehicle repair, transport, and creative industries) supply below-average proportions of their staff with training, either on or off the job. LSC priority sectors of construction and engineering are in this group; as are the RDA’s priority sectors of advanced engineering, food and drink, and ICT; and one of the RDA’s ‘Emerging Sectors’, the creative sector.
• The retail and hospitality sectors are below average in their training of staff off the job but train large numbers of staff on the job. The retail sector is a priority sector for the LSC whilst leisure and tourism, encompassing hospitality, is a priority for the RDA.
• Most sectors with an element of public funding in their delivery train staff in both modes at above-average levels but the energy and utilities and the financial services sectors are also in this group. The LSC’s priority sectors of social care and health are in this third group.

A further indicator, bearing on the depth of employer commitment to training, is how much employers spend on training. Bearing in mind the limitations of the survey(71), it is estimated that the amount of expenditure(72) on training by employers in the South West was as in the table below.

The survey estimates(73) that the total direct expenditure on training in the South West may be at least £264.8 million. This figure can be related to the number of employees in the South West and also to the number of ‘training episodes’ (defined as a period of on- or off-the-job training by an employee). For comparison, the same calculations are performed for England as a whole:

Table 16: Estimated expenditure on training (‘out of pocket’ only), South West and England, 2005

Notes: Bases = 5,885 establishments which supplied training in the South West & 54,866 in England.
Source: NESS05

The data suggests that the South West is below average on measures of training expenditure by employers. This may reflect the slightly shorter average duration of training in the region but may also reflect unknown variation between regions in the cost of training or in the type of training supplied which the survey was not able to detect.

Conclusions

Information on employers' contribution to skills is sparse. The NESS 2005 provides some useful insight into the nature and scale of employer contribution to skills development. More information is needed so that the public funding contribution can complement rather than replace this investment. SSCs should seek to articulate employer contributions to skills.

(71) The figures given by respondents may have been fairly approximate and 28 per cent of respondents who had trained staff did not know how much they had spent.
(72) It should be noted that employers were asked to estimate the ‘out-of-pocket’ costs of training and not to include the costs of staff time.
(73) The figure includes those who did not how much they spent on training. It might be assumed that those employers who trained staff but did not know how much they spent on training spent on average at least as much as those who did know (a reasonable assumption since the proportions of those who did not know how much they spent rose with size of establishment).