Scotland's skill set: the future of work and business

The coronavirus pandemic has had an enormous impact on the global economy and Scotland, like all countries, has been deeply affected.

However, the relaxation of coronavirus restrictions, brought about by the marvel of vaccines, has left Scotland’s economy facing a minor post-pandemic boom – ONS figures show there are now more people in work in Scotland than before the pandemic, despite a recent contraction.

This new period of recovery brings with it an opportunity for the Scottish Government, which says it can now “make choices about the sort of economy we want to have and to focus our efforts on building back fairer and stronger, and addressing the weaknesses that coronavirus has highlighted”.

But in which direction is Scotland’s resurgent economy now headed, and how can the current and up-and-coming workforce gain the skills they need to compete in this brave new world?

The first half of that question is much easier answered than the latter – green and digital jobs in new and emerging industries are shaping up to be major employers as Scotland looks to decarbonize its economy, and digital technologies continue to transform our lives and how we interact with businesses, governments, and each other.

In green industries, the Scottish Government hopes that its pledge to transition to a sustainable, net zero society by 2045 and restore Scotland's environment will create a demand for a wide range of jobs with new skills and long-term career prospects.

To support this, the government announced a £100m Green Jobs Fund in September 2020. The fund is set to invest £50m through Scottish Enterprise, Highlands and Islands Enterprise, and South of Scotland Enterprise to help businesses which provide sustainable, low-carbon products and services to develop, grow and create jobs.

A further £50m is set to be invested to support businesses and supply chains across a range of sectors - such as manufacturing, tech, and land-based organisations - to take advantage of public and private investment in low carbon infrastructure, and the transition to a low carbon economy in Scotland.

“There are a lot of new skills that are required given the emergence of new and green technologies,” says James Black, knowledge exchange fellow at the Fraser of Allander Institute, “and we're all going to have to get more familiar with them as we decarbonize our economy.

“Talking to employers, and talking to experts in the industry, it's not as simple as retraining people who deal with traditional boilers to deal with air source heat pumps - these sorts of things are much more complex, and so there’s going to have be a huge investment from both employers and from the government in developing the skills we need to be able to cope with the decarbonisation of our economy.”

There is also a concern, according to Black, that the ambitions of the Scottish Government are running up against the capacity of the Scottish labour market and the country’s supply chains, which might struggle to meet the government’s expectations. Supplying huge onshore and offshore windfarms with workers and materials, as well as retrofitting homes, and at the same time decarbonising all parts of the Scottish economy, could be too much for a limited labour market and supply chain.

The Scottish Government also has its work cut out in driving forward digital skills in its recovering economy.

In March 2021 the government published its strategy document, ‘A changing nation: how Scotland will thrive in a digital world’, which sets out how the government expects to achieve its digital revolution.

“Ensuring we have a strong, digitally skilled workforce will be a key driver to inclusive economic growth,” the document reads, “and it will support the digital technologies sector – a high-growth sector that is key to economic recovery.

“A recent CBI Scotland study indicates that the adoption of new technologies – and the skills to use them – could add £25bn to the Scottish economy over the next decade, but this will only be realised if we raise the digital competency of everyone in Scotland.”

But before the pandemic, the shortage of skills required to meet the demand for digital roles was restricting growth.

Research funded by the UK Government’s Department for Digital, Culture, Media and Sport shows that in Scotland, 75 per cent of all advertisements for jobs classified as ‘low-skilled’ now require baseline digital skills, such as the ability to use spreadsheets and word processing applications, but only 77 per cent of people in Scotland aged fifteen or over can complete all seven tech skills considered to be ‘foundation’ level in Scotland, compared to the UK average of 84 per cent.

According to the Scottish Government, “only when people have achieved proficiency in all seven foundation levels can they begin to develop skills considered to be essential for employment, and just 39 per cent of the Scottish workforce is able to complete the essential employment skills.”

A different study suggests that by comparison, in the Netherlands, 83 per cent of the population has above basic levels of communication skills, and 81 per cent has above basic problem-solving skills broadly comparable to these essential skills.

“The large-scale survey work that the Scottish Government has carried out with the business population in Scotland really sort of suggests that we've not managed to shift the dial on that front,” says Stuart Mackinnon, head of public affairs in Scotland at the Federation of Small Businesses (FSB).

“Broadly, far more people are accruing digital skills, the market is hungrier and hungrier for those with good digital skills, and in the end, no matter what sort of job you're doing it’s becoming more and more likely that there's an expectation that you'll have a variety of digital skills.”

Brexit too, is causing labour shortages in other sectors – particularly in hospitality, agriculture, and the NHS.

Speaking to the Scottish Parliament in January, Finance and Economy Secretary Kate Forbes said that Scottish businesses are suffering due to the ending of free movement.

“In the latest published data, which is from November 2021, over one-third of Scottish businesses reported experiencing a shortage of workers,” the minister said.

“Candidate supply for permanent jobs also reached an all-time low in the same month. And almost half of businesses in the accommodation and food sector reported difficulties filling vacancies during this period, as did more than half of construction, health and social care and transport and storage businesses.

“The ending of freedom of movement has made it more difficult for those sectors which have traditionally relied on EU citizens.”

According to Black, while green and digital jobs may be the future, the hospitality, health and agricultural sectors “need to be more valued and respected” by the UK and Scottish Governments, as they face labour shortages and skills gaps in the present.

An overlooked aspect of the current skills and labour shortage is the lack of entrepreneurs starting businesses in Scotland since the pandemic began – the FSB estimates that Scotland has lost 20,000 important small businesses in the last two years.

However, the FSB says there is “untapped potential” in underrepresented demographics in business, such as women and migrants, which could boost the number of entrepreneurs and businesses in Scotland, and lead to greater economic recovery.

“Even to get back to where we were, it's going to take an awful lot of work,” says Mackinnon, “and the next generation of entrepreneurs and local startups are going to have to come from every part of Scottish society.

“We've done work looking at women in business, highlighting that there's work to do to bring the number of startups amongst women to the same rate as men, and to highlight the economic benefits that would bring.

“We've also shown that there is untapped potential in migrant entrepreneurs in Scotland, highlighting that people who were not born in Scotland, but then move here, are more likely to start a business, but less likely to tap traditional sources of enterprise support, whether that's through government agencies or other bodies.”

The FSB highlights that immigrant-led small and medium-sized businesses contribute £13bn a year to the Scottish economy, while Scotland’s women-owned businesses are now responsible for creating 231,000 Scottish jobs, up from 153,000 in 2012. Across the UK, a quarter of private sector employment (23.85 per cent) is now calculated to be generated by women-owned and women-led businesses.

While the expansion of women-led and migrant-led businesses is contributing more and more to the economy and jobs market, there is still a wealth of potential entrepreneurs that need to be found to bring the numbers in line with male-led businesses – something that will require further investment in education and training.

The demand for skilled employees, particularly women and minorities, in green, digital and small business sectors is evident, but how can Scotland’s work force evolve to meet the demand? The answer lies in both upskilling the current workforce, and in ensuring the next generation of workers are equipped with in-demand skills – both of which will require major investment from governments and businesses.

“I think it's probably a bit of both, but I think the focus of investment has to be on people entering the labour market,” says Black.

“There is definitely room for upskilling or re-skilling, and I don't think it's about graduates necessarily, I think it's about options for vocational training as well.

“The private sector has a real role to play here as well, because they want to have the people with the right skills in the local community as well. They want to ensure that the benefits stay in Scotland.”

Mackinnon, on the other hand, says that skilling and reskilling workforces through education is the way forward.

“The general consensus that we need to do more work to encourage employees to reskill and upskill over the course of their working life,” he says.

“Of course, it's a role for employers to encourage their workforce to do that. From our point of view, we know that many large businesses and large public sector bodies for example, have very close links with colleges or higher education institutions.

“Smaller businesses are a slightly different kettle of fish. And we would like to see work done to make it easier and more attractive for a small businesses to upskill their staff and that includes continued rollout of more bite-sized, accessible bits of learning, rather than something that would require a long and continued commitment by the business.”