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West Midlands Local Skills Report Annex B - Evidence Base 2022

Local Skills Report Evidence Base – Demand Analysis Key Findings

Key findings
  • ‘Replacement demand’, the need to replace retiring workers, will drive significant recruitment even in occupations with declining employment, such as machine operatives, skilled trades, and secretarial work. On the other hand, professional occupations are projected to grow strongly through the decade, with 26% of positions coming from expansion and 74% from replacement.

  • There has been a rapid decrease in the percentage of the working-age population with no qualifications, and growth at most higher qualification levels. However, the West Midlands still is projected to see

    the slowest growth in residents educated to postgraduate level through 2027,
    and slowest decrease in those with no qualifications, in the country.

  • A rapid recovery has been observed in
    job postings since the winter 2020/2021 lockdown, surpassing past trends. This
    can be attributed to the phenomenon of
    the ‘great resignation’, i.e. an unusual level of labour market mobility as people re- evaluate their careers in the aftermath of the pandemic.

  • Lack of needed skills is cited by employers as the top cause of vacancies being hard to fill.

  • There is a continuing lack of awareness amongst smaller employers of how the apprenticeship system works and how to take advantage of it.

2020-2027 Projections by Broad Sectors: Working Futures

The current economic disruption from COVID-19 will strike at many of the assumptions made in recent projections and analyses of the regional economy. Macroeconomic forecasts are always subject to a high degree of uncertainty in any case, but this is uncertainty is greatly amplified by the fact that we do not know when the COVID-19 restrictions will be fully eased or what the ultimate state of our future trading relationship with the European Union and other countries will be.

Consequently, the employment projections on which our analysis is based likely will be less accurate. Projections will, however, indicate some of the long-term technological changes and challenges sectors of the economy will face, some of which may be accelerated by the present crisis. Department for Education economic analysis indicated that across the broad sectors of the UK economy we could expect the following annual employment trends through to 2027:

Business and other services employment to expand by 0.6% annually, driven by growth in financial and professional services, science and tech work, and IT. These increases are ascribed to the UK’s comparative advantage in these sectors (noting however its dependence on future trading arrangements), and a rate of venture capital investment in tech start-ups which continues to outstrip other European countries.

  • Non-marketed services to grow by 0.5% annually, with growth concentrated in healthcare provision in response to an ageing population. Shortage of teachers and dependence on the influx of university students from China and India are cited as risks to this part of the sector.

  • Trade, accommodation, and transport expected to grow by 0.1% annually, with technological change having markedly different effects on different components of this sector.

  • Construction to expand by 0.2% annually, with a significant skills shortage and dependence on labour from the EU cited as challenges for the sector.

  • Manufacturing employment is projected
    to fall by 1% annually, partly a continuation of past trends and partly impact to trade resulting from the altered UK-EU relationship. The 60% of UK food exports currently destined for the EU and £1.8 billion estimated cost of EU tariffs to UK motor vehicle exports are cited as determinants.

In the West Midlands, broadly similar sectoral changes are expected to the UK as a whole. However, some of the risks cited above, particularly in manufacturing, may yet have a disproportionate impact on the region’s major employers.

Working Futures projections show a growth in white collar and highly skilled jobs. A ‘polarisation’ or ‘hollowing out’ may lead to greater employment in both low and high-skilled employment and a loss of intermediate roles such as administration/ secretarial roles and skilled manual trades. Future growth is expected to be more concentrated in part-time positions versus full-time.

The main conclusion drawn on the effect of technological change was that changes to the pattern of employment within, rather than between sectors will have the decisive effect. For instance, retail workers will doubtless be affected by expansion of self-service and other technologies, and may not recover fully from the current economic disruptions. Other, less easily automated, services (such as waiting tables)

are likely to be more resilient to automation in the long term. Similarly, we can expect growth in management, directors, and highly skilled professions while admin and secretarial work will be more vulnerable to automation.

Future Projections by Local Enterprise Partnership
Industry Projections
The sharpest decline in manufacturing employment (percentage of projected employment in 2027 versus 2017) is expected in the Black Country, a concern given that the sector makes up more than a tenth of its employment. The Black Country is, however, expected to see more rapid growth in construction.
Industry
BCLEP
CWLEP
GBSLEP
Primary sector and utilities 2.4 2.5 4.7
manufacturing 13.2 11.2 11.5
construction 1.3 0.5 0.3
trade, accommodation,transport 0.8 0.6 0.3
business and other services  2.9 4.1 2.4
non marketed services 3.9 1.2 1.5

Table 16: Forecast total change in employment by sector and Local Enterprise Partnership, 2020-2027.

Nature of Work

While the proportion of men and women within any individual industry is expected to essentially remain constant between 2017 and 2027, Working Futures projects certain broad trends coming from the change in the relative size of industries (percentages here refer to percentage of the working age population in 2017 versus 2017):

  • Unsurprisingly, part-time employment is projected to increase steeply over the reference period, around 0.8% for women and 1% for men.
  • A modest decline in self-employment across both genders and all three LEP areas, and declining twice as fast in men (0.4 to 0.5% decline as a share of the working-age population) than women (decline of 0.2%). This decline should be a concern if it stems from increasing risk-aversion as a result of declining prospects for young people, as this may blunt entrepreneurship.

Full-time employment is expected to decline as a proportion of employment. This decline is entirely due to less men working full time, with the proportion of women working full time actually increasing slightly (around 0.5% increase as a share of working-age population across all three LEP areas.) This is almost certainly a result of increasing employment in professional services and a decrease in manufacturing employment.

Replacement Demand by Occupation

The demand for new employees coming from the need to replace the existing workforce dwarfs the demand coming from industrial change, across all three Local Enterprise Partnership areas. The tables below set out the total demand for jobs as a proportion of the existing (2017 base year) workforce, and how change to the overall size of the industries (2017-2027) and

In the Black Country this difference is starkest, with a lower projection for employment growth in industries (1.5%) than in GBSLEP (2.0%) and Coventry and Warwickshire (2.1%) reflecting differences in the age breakdown of each population. This forecasting suggests, therefore, that for each job generated by new growth in an industry, more than 16 jobs will be generated by the need to replace workers who retire or move to other occupations:

Occupation
Change
Replacement
Total demand
managers, directors and senior officials 11.9 38.7 50.7
professional occupations 12.1 34.6 46.7
associate professional and technical 9.0 32.9 41.9
Administrative and secretarial 14.9 31.8 16.9
skilled trade occupations 11.9 25.9 13.9
caring, leisure and other services 13.5 40.5 54.0
sales and customer Services 4.0 30.3 26.3
process, plant and machine operation 10.6 29.6 18.9
elementary occupations 1.2 31.8 30.6
all occupations 1.5 33.1 34.5
Black Country

Table 17: Replacement component of demand by occupation level, BCLEP, 2017-2027

 

Occupation
Change
Replacement
Total demand
managers, directors and senior officials 13.2 39.0 52.2
professional occupations

11.8

34.0 45.8
associate professional and technical 9.7 32.8 42.4
Administrative and secretarial 13.9 32.0 18.1
skilled trade occupations 11.7 26.1 14.4
caring, leisure and other services 12.6 40.2 52.8
sales and customer Services 2.6 30.6 28.0
process, plant and machine operation 9.1 30.0 20.9
elementary occupations 0.3 32.3 32.0
all occupations 2.1 33.1 35.2
Coventry and Warwickshire

Table 18: Replacement component of demand by occupation level, CWLEP. 2017-2027

 

Occupation
Change
Replacement
Total demand
managers, directors and senior officials 12.9 39.0 51.8
professional occupations

11.4

34.3 45.6
associate professional and technical 8.8 32.7 41.6
Administrative and secretarial 14.7 31.8 17.1
skilled trade occupations 11.3 26.1 14.8
caring, leisure and other services 12.5 40.2 52.7
sales and customer Services 2.6 30.6 28.0
process, plant and machine operation 8.9 30.3 21.5
elementary occupations 0.0 32.2 32.2
all occupations 2.0 33.2  35.2
Greater Birmingham and Solihull

Table 19: Replacement component of demand by occupation level, GBSLEP.

 

Sector Highlights:

To put these projections in context, the table below shows a breakdown by industry of how much each industry contributes to the West Midlands economy at the moment, and its total employment footprint, as well as trajectory over the last ten years (2021 vs 2011.) Industries such as manufacturing are projected to follow a very different and more negative trajectory in the future than we observed in the last ten years.

Industry
GVA (£M)
% GVA
Jobs
Employment vs 2011
Wholesale and retail trade, repair of motor vehicles  10,600 13.6 297,819 10.0
Manufacturing 10,560 13.5 205,169 7.8
Human health and social work activities 7,127 9.1 239,428 7.1
Construction  6,364 8.2 127,973 27.4
Administrative and support service activities  5,922 7.6 77,974 0.3
education 5,744 7.4 204,169 46.1
finance and insurance activities 4,162 5.3 53,959 6.3
Transportation  and storage 3,573 4.6 119,933 42.6
information and communication 3,361 4.3 47,037 10.1
public administration and defence, compulsory social security 2,764 3.5 66,522 15.8
accommodation and food service activities 2,750 3.5 139,287 43.2
real estate activities 2,443 3.1 32,601 42.1
electricity, gas, steam and air supply 1,927 2.5 36,300 4.0
water supply 1,192 2.4 9,971 8.9
arts, entertainment and recreation 1,160 1.5 39,746 13.9
agriculture, forestry and fishing 465 0.6 6,078 17.6
mining and quarrying 237 0.8 827 36.1

Table 20: Industry summary showing, across the West Midlands Local Enterprise Partnerships, how much of the region’s economy is comprised of each industry, along with ten-year employment trajectories.

2020-2027 Projections by Qualification

The trend for this region is more sobering in the comparison in Table 6. The West Midlands is projected to have both the second lowest increase in employees qualified to Postgraduate level by 2027 at 0.8% annually, and the slowest decrease in those without any qualifications at all at 2.9% annually, less than half the UK average (6.0%).

UK Nation or region of England
Post grad degree
first degree
RQF 3 & 4
RQF 1 & 2
None
London 2.7 2.5 0.2 4.7 9.2
South East 3.1 2.8 0.7 2.7 7.2
east England 3.2 3.4 0.3 2.3 6.2
South west 3.5 2.5 0.3 2.9 8.1
west Midlands 0.8 3.1 0.5 1.9 2.9
East Midlands 2.9 2.2 0.6 1.5 7.3
Yorkshire and the humber 0.7 2.6 0.7 1.8 3.8
North west 4.0 2.5 0.3 2.6 6.2
North east 1.3 3.0 0.9 2.1 6.1
England 2.7 2.7 0.2 2.6 6.2
Wales 3.4 2.3 0.4 1.9 5.9
Scotland 3.9 3.1 1.3 2.9 4.9
Northern Ireland 2.3 2.0 0.1 0.4 4.9
UK 2.6 2.7 0.1 2.5 6.0

 

Table 21: Annual rate of change as a proportion of the workforce by qualification level and region

2020-2017 Projections by Industry:

Given the conclusion in the Working Futures report that the ‘replacement demand’ needed to fill the employment gaps left in industries by an ageing workforce comprise the vast majority of new job postings, it is not surprising that the sectors of the West Midlands economy posting the most jobs are for the most part already the largest.

Service sector job positions predominate in growth with catering (1,327), waiting and bar staff (1,030 and 738), care work (811), and book- keeping and payroll (676) the fastest-growing

sectors. The fact that front-line service jobs underpin so much current and future economic output is concerning given the current pandemic, and will be considered further below.

Skills demanded by employers

The most recent (2019) Employer Skills Survey (ESS) gathers information on skills needs and training from employers via telephone survey. It asks questions about which skills are in short supply in job applicants for different roles, as well as any training the firm is delivering.

Summary
  • Lack of the necessary skills is the single greatest obstacle to recruitment in BCLEP and CWLEP, while in GBSLEP it is second after poor terms and conditions on offer. Far more vacancies in GBSLEP have been affected by Brexit uncertainty, unsociable hours, and lack of career progression opportunities than the other LEP areas or the England average.

  • In both CWLEP and GBSLEP, recruitment is made more difficult by a lack of advanced IT, statistics, and data science skills. In advanced IT in particular, both LEP areas considerably outstrip the England average of 20% in terms of the proportion of skills- shortage vacancies that are difficult to fill for this reason (25% in CWLEP, 22% in GBSLEP.)

  • BCLEP still has a very high demand for manual and machinery operating skills, driven by the need to replace its ageing workforce. This will continue to create vacancies even while the sector is shrinking.

  • A large proportion of skills-shortage vacancies prove difficult to fill due to the lack of necessary social skills, such as teamwork and presentation skills. While the West Midlands does not differ greatly from the England average in this area, in both areas social skills of one form or another are a constraint on recruitment for around half of positions.

  • There is a fairly low level of awareness amongst West Midlands employers of the apprenticeship system and how it can support them. Only 41% of employers in the Black Country, 37% in CWLEP, and 40%in GBSLEP were aware of the introduction of the apprenticeship levy. Of these, 58%, 60%, and 60% were aware that this levy applies to employers with an annual wage bill of more than £3million. Fewer still were aware of the premium available for recruiting apprentices from deprived areas, with 21% in the Black Country and 22% in CWLEP and GBSLEP being aware of this. Small businesses between 10 and 49 employees are more common in the West Midlands, and may be missing out through financial pressure and the administrative time it takes to arrange apprenticeships.

Reasons for Vacancies

The contribution that skills shortages make to vacancies is similar in the West Midlands to the England average. Shortage of the necessary qualifications is likewise considered neither better nor worse. However, there are some marked differences in other questions about how the labour market affects recruitment. GBSLEP has far more of a problem with shift work and unsociable hours deterring applicants (likely stemming from the city centre’s strength in retail, restaurants, and leisure.) The concentration of professional services may also have contributed to the much higher concern about Brexit impacts (due to greater inter-connectedness) and career progression.

Breakdown

BCLEP - 34

CWLEP - 33

GBSLEP - 30

England - 34

BCLEP - 16

CWLEP - 12

GBSLEP - 27

England - 20

BCLEP - 26

CWLEP - 17

GBSLEP - 31

England - 17

BCLEP - 8

CWLEP - 27

GBSLEP - 25

England - 16

BCLEP - 19

CWLEP - 10

GBSLEP - 10

England - 13

BCLEP - 12

CWLEP - 10

GBSLEP - 9

England - 11

BCLEP - 2

CWLEP - 6

GBSLEP - 10

England - 11

BCLEP - 12

CWLEP - 9

GBSLEP - 21

England - 10

BCLEP - 10

CWLEP - 7

GBSLEP - 13

England - 10

BCLEP - 12

CWLEP - 10

GBSLEP - 12

England - 8

BCLEP - 17

CWLEP - 7

GBSLEP - 4

England - 7

BCLEP - 0

CWLEP - 1

GBSLEP - 16

England - 2

BCLEP - 1

CWLEP - 2

GBSLEP - 1

England - 2

BCLEP - 5

CWLEP - 1

GBSLEP - 16

England -2

BCLEP - 0

CWLEP - 2

GBSLEP - 1

England - 1

BCLEP - 0

CWLEP - 3

GBSLEP - 1

England - 1

Figure 11: Breakdown of hard-to-fill vacancies by type, showing that lack of requisite skills is the prime cause in all LEP areas but GBSLEP, in which poor terms and conditions were the main obstacle.

Skill Shortage Vacancies by Type

Skilled trades occupations are frequently in short supply in the Black Country, with lack of skills cited for 35% of firms as constricting their ability to hire, versus 24% in England. This likely reflects significant replacement demand for existing workers in these lines of work rather than growth in total employment. BCLEP also lacks sufficient skilled workers in care, leisure and other services (24%) compared to the England average (14%). In this case the sector is both large and growing. Lack of the necessary skills is also strongly affecting professional-level recruitment in GBSLEP (20% of vacancies affected). These figures are presented below against the England average, with each percentage figure representing the proportion of firms which had skills shortage vacancies of the given type.

Breakdown

BCLEP - 35

CWLEP - 31

GBSLEP - 19

England - 24

BCLEP - 8

CWLEP - 17

GBSLEP - 12

England - 16

BCLEP - 16

CWLEP - 10

GBSLEP - 20

England - 15

BCLEP - 6

CWLEP - 17

GBSLEP - 17

England - 14

BCLEP - 24

CWLEP - 8

GBSLEP - 16

England - 14

BCLEP - 8

CWLEP - 15

GBSLEP - 10

England - 8

BCLEP - 11

CWLEP - 5

GBSLEP - 6

England - 8

BCLEP - 5

CWLEP - 5

GBSLEP - 3

England - 8

BCLEP - 0

CWLEP - 5

GBSLEP - 4

England - 4

BCLEP - 0

CWLEP - 0

GBSLEP - 0

England - 1

Figure 11: Skills shortage vacancies are here broken down by occupation, showing the significance of the problem in skilled trades in particular.

IT Skills

The chart below displays the proportion of skills-shortage vacancies which are made difficult to recruit due to a lack of specific IT skills. Basic IT skills such as Microsoft office are still cited as a major constraint in the Black Country (39% of posts), less so in CWLEP (20%) and similar to the England average in GBSLEP (30% in GBSLEP versus 33% in England).

GBSLEP has a notable shortage of data analysis and data science skills, likely reflecting its concentration of professional services firms. The density of game development firms in Leamington Spa in CWLEP appears to have been picked up in the sample, with a far greater shortage of skills in online transactions, data science, and social media/marketing in CWLEP than the other two LEPS or England average.

Breakdown

BCLEP - 37

CWLEP - 21

GBSLEP - 27

England - 34

BCLEP - 29

CWLEP - 12

GBSLEP - 24

England - 26

BCLEP - 12

CWLEP - 31

GBSLEP - 26

England - 18

BCLEP - 18

CWLEP - 26

GBSLEP - 10 

England - 18

BCLEP - 9

CWLEP - 2

GBSLEP - 8

England - 7

BCLEP - 1

CWLEP - 3

GBSLEP - 1

England - 6

BCLEP - 10

CWLEP - 2

GBSLEP - 9

England - 5

BCLEP - 3

CWLEP - 11

GBSLEP - 9

England - 5

BCLEP - 3

CWLEP - 6

GBSLEP - 3

England - 5

BCLEP - 3

CWLEP - 1

GBSLEP - 7

England - 4

BCLEP - 0

CWLEP - 0

GBSLEP - 1

England - 3

BCLEP - 4

CWLEP - 1

GBSLEP - 1

England - 3

BCLEP - 1

CWLEP - 5

GBSLEP - 1

England - 2

BCLEP - 0

CWLEP - 3

GBSLEP - 3

England - 2

BCLEP - 1

CWLEP - 1

GBSLEP - 6

England - 1

BCLEP - 1

CWLEP - 1

GBSLEP - 2

England - 1

BCLEP - 0

CWLEP - 5

GBSLEP - 0

England - 1

Figure 13: Breakdown of IT-specific skills-shortage vacancies by the specific IT skills required, showing that more basic and foundational skills are the typical obstacle, as well as specialised software used in that area of work. However, more advanced skills in data analysis and programming are also cited, and jobs requiring these are typically more highly paid.

Practical Skills

The survey also assessed the proportion of skills-shortage vacancies for which key technical and practical skills were making them difficult to fill. Comparison of LEP areas based on general practical skills is revealing:

 
Total
BCLEP
CWLEP
GBSLEP
Reading and understanding instructions, guidelines, manuals or reports 30 23 27 40
basic numerical skills and understanding 23 23 19 30
More complex numerical or statistical skills and understanding 23 20 22 36
Adapting to new equipment or materials 21 32 15 17
Computer literacy/ basic ICT skills 20 14 17 29
manual dexterity 18 11 18 35
Advanced or specialist IT skills 17 11 25 22
Communicating in a foreign language 17 6 12 9
None of the above 8 4 5 12
Don't know 9 9 9 8

Table 22 Key practical skills cited as obstacles to filing vacancies are set out here, with the shortage of numerical and statistical skills in GBSLEP particularly striking.

The greater prevalence of professional services and concentration of research activity in the GBSLEP is readily apparent in the much greater demand (relative to supply in the labour market) for mathematics and IT skills. That 36% of skills-shortage vacancies in GBSLEP are affected by difficulty in obtaining complex numerical or statistical skills is very striking. This is much higher than the England average (23%) and implies that this shortage is a major impediment to growth and recruitment. High demand for advanced/specialist IT skills are also constraining recruitment, particularly in CWLEP.

Equally pronounced is the demand in BCLEP for manual dexterity and equipment skills, likely to be ‘replacement demand’ for new staff to replace an ageing workforce in the manufacturing sector, rather than the creation of new jobs. The lower demand for numerical and IT skills in BCLEP is likely due to weaker growth in sectors such as professional services, rather than a greater availability of these skills in the workforce.

Social Skills

The summary below presents the proportion of skills-shortage vacancies which are difficult to recruit for owing to lack of particular social skills in applicants:

 
Total
BCLEP
CWLEP
GBSLEP
Reading and understanding instructions, guidelines, manuals or reports 30 23 27 40
basic numerical skills and understanding 23 23 19 30
More complex numerical or statistical skills and understanding 23 20 22 36
Adapting to new equipment or materials 21 32 15 17
Computer literacy/ basic ICT skills 20 14 17 29
manual dexterity 18 11 18 35
Advanced or specialist IT skills 17 11 25 22
Communicating in a foreign language 17 6 12 9
None of the above 8 4 5 12
Don't know 9 9 9 8

Table 23 Key social skills causing hard-to-fill vacancies.

Shortfalls in social skills are not greatly different
in the three LEP areas versus the England; it is notable how high a proportion of skills-shortage vacancies are difficult to fill due to lack of team working, polish, and general social skills. In light of the shortage of IT and mathematical skills identified

above, it is likely that supporting training courses that inculcate high-level technical skills combined with strong team working and presentation skills would be a winning combination in the current job market.

Apprenticeships and Traineeships

A significant impediment to the delivery
of higher number of apprenticeships in the region is a lack of employer awareness of how the apprenticeship system works. As of the survey date in 2019, only 41% of employers in the Black Country, 37% in CWLEP, and 40% in GBSLEP were aware of the introduction of the apprenticeship levy. Of these, 58%, 60%, and 60% were aware that this levy applies to employers with an annual wage bill of more than £3million.

While none of the figures depart markedly from the England averages, they do indicate a lack of awareness amongst employers of the financial setup of apprenticeships which would allow them to make decisions about whether it would benefit them to take an apprentice on. For instance, only 27% of employers in the Black Country and CWLEP and 30% in GBSLEP were aware of the 5% co-investment payment

employers provide to support apprenticeship costs. Fewer still were aware of the premium available for recruiting apprentices from deprived areas, with 21% in the Black Country and 22% in CWLEP and GBSLEP being aware of this.

You would not expect all employers to be aware of the details of the apprenticeship system, particularly if the recruitment of apprenticeships is not directly applicable to their business - for instance if they are a very small firm. Financial constraints and the administrative overhead of organising an apprenticeship are also major contributors to lower take up, particularly in the current circumstances. However, the West Midlands has a significant share of small firms relative to the England average which might benefit from greater access to apprenticeships. The table below shows the distribution of different sizes of firm as a proportion of the total number of firms in a given area:

Employee
England
BCLEP
CWLEP
GBSLEP
2-4 55 49 53 52
5-9 21 19 16 18
10-24 15 20 20 19
25-49 5 7 6 6
50-99 3 3 3 3
100-249 1 2 1 2
250 or more 1 - 1 1

Table 24 Proportion of employers by size and LEP area who are aware of how the apprenticeship system works.

Notes on Methodology

Unlike all other regions, in the West Midlands the ESS did not conform to a strict quota of business sizes and sectors. This will have affected the accuracy of the work. However, many metrics for the West Midlands match closely to the England average, implying that this bias is not uniform.

In some instances, the data for a given category for a given LEP is missing due to insufficient sample size. Significant overlap between categories and responses mean percentages will not sum to 100% for each LEP area. For instance, a vacancy may exist for more than one reason.