More than seven in ten Scottish businesses are struggling with skills shortages – but almost 40% don’t have programmes in place for underrepresented groups, new research shows.

The annual Business Barometer Report from The Open University and British Chambers of Commerce finds most organisations in Scotland – 71 per cent – are continuing to report skills shortages.

Engineers, IT professionals, social care staff, trades – including joiners and plumbers – and administration staff are the most in-demand roles in Scotland, the report shows.

But Scottish businesses need to get better at hiring staff from underrepresented groups such as people with disabilities or workers from diverse ethnicities.

The report finds 39% of Scottish organisations don’t have any initiatives, skills programmes or workplace adjustments in place for specific talent pools like these.

“Employers are missing out on the hidden talent pool and an opportunity to ‘grow your own’ talent,” the authors suggest. Particularly during a time when two in five Scottish organisations – 42% – say lack of applicants has prevented them from filling roles.

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Baroness Martha Lane Fox, chancellor at The Open University and president of the British Chambers of Commerce, said it was concerning that organisations weren’t investing in specific talent pools, including underrepresented groups.

“If organisations continue to ignore these workers, they risk missing out on untapped talent and deepening the skills gap even further,” she said. “There could be a big opportunity for employers here if hidden talent is given a boost.”

The ongoing skills shortage is continuing to have a negative knock-on effect on existing staff morale and wellbeing in Scotland, the Business Barometer Report finds.

Three quarters of organisations in Scotland – 75% – say skills shortages have increased the workload on existing staff.

Output has also reduced for more than four in ten organisations in Scotland – 44% –  while 36% have had to cut back their long-term growth plans.

The impact of these skills shortage pressures could “lead to further challenges for the economy” and hold back the ability of organisations to meet decarbonisation targets and equality, diversity and inclusion goals, the authors suggest.

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David Allen, acting depute director for external engagement and partnerships at The Open University in Scotland, said: "Skills shortages are biting hard; damaging businesses and holding back economic growth. Never has it been more important for businesses, governments and training providers to work together to find solutions.” 

Another concern is the ageing of Scotland’s workforce. This poses the threat of employers not having the skills to replace experienced employees when workers retire.

A third of organisations in Scotland – 33% – report a rise in the number of employees over the age of 50 in the last three years. Yet 86% of organisations don’t have a specific initiative in place for workers over 50, the authors say.

Three quarters of organisations in Scotland also lack any written annual plans to prepare for people exiting the business.

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Over the next 12 months, 77% of Scottish organisations intend to use some form of training for their staff, the report finds. The data indicates, though, that organisations – and especially small and medium sized enterprises – lack the “necessary expertise and resources to strategically address the skills gaps and challenges effectively.”

As a result, many firms are “trapped in a cycle of continual recruitment and retention challenges,” the authors say.

The Covid-19 pandemic, Brexit and spiralling inflation – stemming from supply chain, energy, and wage costs – have contributed to a record number of job vacancies, alongside unprecedented recruitment difficulties, the report notes.

Many of the survey results are almost completely unchanged from last year’s Business Barometer, indicating that “the UK faces a systemic skills gap,” it adds.

The findings are based on 1,289 survey responses from organisations of all sectors and sizes across the UK in April and May 2023.

UK-wide, manufacturers, business-to-business service firms and larger firms with more than 250 employees were most affected by skills shortages.