Skills and productivity in the Heart of the South West: A Technical Paper 1 Contents Summary 4 1. Introduction 9 2. Challenges and responses 10 2.1. The link between skills and productivity 10 2.2 Skills and the Government’s Industrial Strategy Green Paper 12 3. Young labour market entrants 15 3.1. School age education 15 3.2. Staying on rates 17 3.3. Young people and apprenticeships 18 3.4. Further education and training 20 3.5. Destinations at 18 21 3.6. Destinations of locally domiciled higher education students 22 3.7. Higher Education institutions in the LEP area 24 3.8. Employer perspectives on young recruits 26 4. Existing workforce 28 4.1. Qualifications and skills within the resident population 28 4.1.1. Highest qualification held 28 4.1.2. Basic skills 29 4.1.3. Digital skills 30 4.2. Management and leadership 30 4.2.1. Highest qualifications held by managers, directors and senior officials 30 4.2.2. Business planning 31 4.3. Skills imbalances in the existing workforce 32 4.3.1. Utilisation of skills 32 4.3.2. Skills deficiencies 33 4.4. Investment in workforce development 34 4.4.1. Nature and prevalence of training 34 4.4.2. Prevalence and intensity of training by size and sector 35 4.4.3. Patterns of training by occupation 37 4.4.4. Residence-based 37 4.5. Apprenticeships 40 5. Attracting and retaining talent and skills 44 5.1.1. Recruitment and skills shortages 44 5.1.2. Migration 45 5.1.3. Commuting 47 5.2. The Heart of the South West offer 47 2 5.2.1. Market leading employers 48 5.2.2. Quality employment opportunities 48 5.2.3. Earnings 50 5.3. Talent retention 52 6. Future demand for skills 54 7. Unemployed and economically inactive 57 7.1 Unemployment and the characteristics of the unemployed 57 8. Demographic Change 61 3 SUMMARY This document has been produced to support the development of Heart of the South West (HotSW) Productivity Plan Green Paper. It is designed to supplement the Green Paper http://www.torbay.gov.uk/devolution providing further evidence to guide discussions. Young labour market entrants More than a third of young people leave school without achieving good GCSE grades in English and maths and more than two-fifths leave with fewer than five good GCSE passes (including maths and English). Education attainment at age 16 has improved relative to the England average in most parts of the region but is low and falling in Plymouth. While some of the differences in attainment across the LEP area can be explained by pupil characteristics, the Government’s new ‘Progress 8’ measure suggests that only Somerset schools generate levels of learner progression that are above the national average. Staying on rates at 16 are high and comparable to the national average. Engagement in apprenticeships is higher than the national average in all higher tier local authority areas with the exception of Torbay, and is particularly high in Plymouth. Overall, the number of young people starting on the Apprenticeship programme has remained relatively stable over the last 6 years. Those that continue their education at Level 3 are more likely to achieve better than average results in Devon and Torbay both in vocational and academic qualifications, and A Level students in Torbay are significantly more likely to achieve grades AAB or better than those nationally or elsewhere in the LEP area. Take up of STEM subjects at A level are broadly in line with the national average. Young people in all parts of the region are less likely to continue in education at 18 years with notably fewer young people entering higher education, particularly when levels of academic attainment are taken into account. Only Torbay has higher levels of progression into a Russell Group university than the national average. Correspondingly, all higher tier local authorities have higher levels of progression into employment than the national average, suggesting that there may be potential to expand the Apprenticeship ‘learning while earning’ programme within this cohort. It is already particularly popular in Plymouth. More than one-quarter of locally domiciled students who go on to higher education read a STEM-related subject. This is a similar proportion to the national average. One third of locally domiciled first year undergraduates elect to study within the LEP area although this proportion varies considerable across the patch. While almost two-thirds of students living in Plymouth study locally, this falls to one in six, in Somerset. 4 While not possible to isolate the employment destinations of graduates domiciled in the HotSW LEP area, data at the wider South West of England region suggest a high level of attachment to the area. This attachment does however vary significantly by institution. Only 24% of University of Exeter Graduates who are employed in the UK six months after graduating are employed within HotSW. Higher education institutions in the HotSW vary considerably in terms of their geographic ‘reach’. The University of Exeter is the most internationally focussed in terms of recruitment, with one-quarter of first year undergraduates domiciled outside the UK. Examination of UK students shows that less than one third of first year undergraduate students enrolled in HEIs in the area are domiciled locally although this rises to more than half in Plymouth College of Art and University of Mark and St John. Almost three-fifths of working graduates leaving HEIs in the LEP are working in the wider region 6 months after graduation. On the whole, the majority of employers nationally believe young people are well prepared for work with the level of preparedness increasing with the level of educational attainment (and, by default, age) achieved. When young people were found to be poorly prepared this was most commonly due to a perceived lack of working world or life experiences by employers or due to poor attitude, personality or lack of motivation. Very few reported that their recruits lacked basic numeracy or literacy or that they had a poor education. Less than two-fifths of employers in the HotSW LEP area provide work experience placements. This is broadly in line with the national average. Existing workforce Qualifications of the resident population are broadly in line with the national average with one third holding at least a degree level qualification. The proportion of the population holding graduate level qualifications varies considerably across the area from around one quarter in Torbay and North Devon to over half in West Devon and South Hams. Despite this, more than 200,000 residents do not have a qualification higher than Level 2 of whom more than 50,000 do not have any qualifications at all. Around one-quarter of the population of the South West do not have basic digital skills. Indicators of management and leadership quality are below the national average: managers, directors and senior officials working in the LEP area are less likely to hold graduate level qualifications and local enterprises are less likely to have a formal business plan, a training plan or budget for training. One quarter of employers locally reported that they had at least one employee who was “underutilised”. This is lower than the national average. Underutilisation of skills is most commonly reported in the hotels and restaurants, health and social work and arts and other services sectors. 5 Local employers are, in the main, relatively satisfied with the skills of the existing workforce with relatively few identifying any staff who are not fully proficient in their role. Skills gaps affect a small percentage of employees but account for affects one in ten roles in manufacturing. Three quarters of skills gaps are attributed to staff being new to their role and/or training being incomplete. Where they exist, skill gaps have a negative impact on the business in the majority of cases. More than two-thirds of employees working in the LEP area received training in the last year. This is a wider coverage of the workforce than the national average despite employers in the HotSW being slightly less likely to train. Local employers who do train, train for longer but are less likely to provide training other than induction and health and safety training. The LEP area performs less well against the national average in sectors that have the lowest propensities to train: private sector establishments, those employing less than 5 people, and those in the agriculture, construction and business service sector. Unfortunately, this does not suggest much potential for ‘quick wins’ in promoting increased employer participation in training. While employers who train are most likely to say that they train managers, managers are the least likely occupation to receive training. Patterns of training among HotSW residents are typically to those evident nationally with participation highest among those who are already well-qualified and working in the public sector. Propensities to train have not changed significantly over the last decade. Apprenticeships have expanded significantly over the last 10 years although most of the growth occurred with the first half of the decade and has been among adult, rather than young apprentices. While the majority of apprenticeships remain at intermediate level the share at advance and higher level has increased considerably. The profile of take-up by sector subject area locally broadly mirrors the national average. Comparison with the profile of employment locally, reveals a larger share of starts in health, public services and care than might be expected and the potential, possibly, for a greater share of starts in information and communication technology, arts, media and publishing, education and training, travel and tourism, and construction, planning and the built environment to better reflect the profile of employment locally.