The majority (91%) of organisations in the UK struggled to find workers with the right skills over the last year, according to a report commissioned by the Open University.
The Open University Business Barometer, which monitors the skills landscape in the UK, revealed that three in five (61%) senior business leaders report that the skills shortage has worsened over the past year.
Employers are paying a high price to ensure their organisations have the skills required to remain productive, with the shortfall now costing an extra £6.33 billion a year in recruitment fees, inflated salaries, temporary staff, and training for workers hired at a lower level than intended, the report stated.
With skills in short supply, many business leaders (70%) find that the recruitment process is taking on average an additional one month and 22 days. As a result, 64% are spending more on recruitment, with costs increasing by 49% or £1.23 billion in total.
While the process is taking longer, when identified, talented workers with in-demand skills are able to take advantage of their position, driving employers to spend an additional £2.16 billion on salaries. Two-thirds (67%) of employers were obliged to increase their offered salary last year, typically on four occasions each and by an average of £3,400 each time.
The report also found that many organisations have been forced to give up on finding suitable talent, choosing either to hire at a lower level (63%) or leave the role vacant (51%). To address gaps left by doing this, employers spent £1.45 billion on training to bring workers up to the level required, and a further £1.49 billion on temporary staffing.
The financial impact is not the only drawback of the skills shortage, the report found. Around half of organisations (47%) say they are not as agile as they need to be because of a lack of skills.
Management and leadership skills are particularly important for navigating change smoothly, the report suggested. Yet nearly three-quarters (73%) of employers have experienced difficulty in hiring for these roles in the past 12 months.
Furthermore, half (53%) of senior business leaders surveyed expect the situation to deteriorate over the next 12 months. More than two in five (44%) expect their organisation to struggle financially in the next year.
Heightening the focus on work-based training could help, the research suggested. More than three in five (61%) business leaders agree that the apprenticeship levy should help to reduce the skills shortage in the next five years.
David Willett, corporate director at The Open University, said that employers must take a more sustainable approach towards recruiting.
"Employers are spending more than £6 billion a year on the skills shortage, predominantly through recruitment activities, but buying skills and not building them is a short-term approach that ultimately won't pay dividends," he said. "It is crucial that organisations take a more sustainable approach, using training to address their skills gaps from within and reducing their spend in the long term."
Willett added that ‘earn and learn’ training could help to tackle skills gaps in the workforce.
"Investing in work-based training, which allows workers to earn while they learn, will help organisations to bridge the divide between the skills available in the labour market and the skills they need, allowing them to focus on stability and growth in the future,” he said.
“Simply put: better training and development will result in more agile, loyal, motivated and productive workforces that are fully equipped to rise to new challenges and drive organisations forward."
