Scottish firms less likely to report skills shortages compared with UK

Scottish firms are less likely to report skills shortages compared with the rest of the UK, but businesses lack confidence in AI and green technologies.

• While over half (56%) of organisations in Scotland continue to struggle with skills gaps, this is lower than the UK average of 62%.
• Around half of businesses lack the confidence to adopt either AI (56%) or green technologies (47%).
• Martha Lane Fox, Chancellor of The Open University, and President of the British Chambers of Commerce warns organisations need to implement flexible skills plans and inclusive initiatives to build confidence, bridge the skills gap and build a more resilient workforce.

New data from this year’s Business Barometer report published by The Open University in partnership with the British Chambers of Commerce, has found that over half (56%) of Scottish organisations are still reporting worrying skills shortages.

The Scottish report is available to download from the Open University's website.

The annual report, monitoring the current UK skills landscape, highlighted more than half of Scottish businesses (56%) are reporting skills shortages. This is lower than the UK average of 62%, but a modest improvement on 2023 UK results, when almost three quarters (73%) reported skills shortages. However, despite this, less than one in four (23%) organisations have implemented a written skills plan for their workforce this year, hindering the ability to strategically address these issues and prepare for future demands. While 56% of organisations reported a lack of confidence in applying new AI and 47% in adopting green technologies, employers agree that these skills are crucial to the growth and sustainability of UK businesses and the wider economy.

Skills shortages and a lack of confidence, continue to have a knock-on effect on staff morale and wellbeing, as 77% of employers say shortages have increased the workload of their employees – a clear indicator that employers need a strategic, inclusive skills plan to develop talent to fill key skills gaps.

Training and development are critical areas of focus for many organisations. The report has revealed that almost two-fifths (38%) of Scottish businesses intend to use mentoring or coaching within the next twelve months, helping to develop skills as well as fostering a supportive learning environment to enhance employee attraction, engagement and retention. A further 32% intend to use apprenticeships over the next year, showing the value many organisations find in this type of training.

But whilst there is a commitment to address the skills shortage from some organisations, the report reveals the majority of businesses (52%) still do not have specific recruitment, training and retention initiatives in place for underrepresented groups, including young people, older workers, those with disabilities and neurodiverse individuals. As a result, organisations may be missing out by not investing in widening their talent pools to mitigate skills shortages.

Baroness Martha Lane Fox CBE, Chancellor at The Open University and President of the British Chambers of Commerce commented:

“Despite tiny green shoots of improvement, the skills gap remains stubbornly high. This year’s Business Barometer, exposes the impact of this enduring challenge on organisations of all types, including overwork, diminished productivity, and compromised wellbeing.

What’s concerning is the critically low confidence in AI and green technology and the lack of strategic plans or initiatives to engage vital underrepresented groups – both of which are essential to addressing the pivotal challenges of our future.

By fostering innovative strategies and inclusive initiatives, we can bridge the skills gap and build a more resilient workforce.”

David Allen, Senior Partnerships Manager at The Open University in Scotland commented:

"While it's encouraging that the number of Scottish businesses reporting skills shortages is lower than the UK average, the fact that over half still face these challenges indicates there's more work ahead.

“The rapid advancements in green innovations and AI are understandably challenging for many organisations. However, it's promising to see that Scottish businesses are showing more confidence in adopting new technologies compared to their UK counterparts. I urge business leaders to be proactive and leverage the strategic support that organisations like The Open University can provide.

“With over 70% of our 19,500 students working while they study, our flexible, online courses fit seamlessly with business needs. By empowering organisations to upskill in crucial areas like AI and green innovations, we can bridge the skills gap and build a resilient, future-ready workforce driving sustainable growth across Scotland."

Anna Ashton Scott, Head of Skills at The Data Lab, Scotland’s innovation centre for data and AI, commented:

“Fostering data and AI literacy, as well as providing robust technical education and leadership training, remains crucial for boosting productivity and driving innovation. AI technologies can be transformative for businesses, but bringing employees on the journey is key, as is understanding how to apply these tools in an ethical and inclusive way.

“While it’s encouraging to see Scottish businesses showing more confidence in applying AI technologies compared to their UK counterparts, more needs to be done to support the 56% of organisations lacking confidence.

“In a time of rapid technological advancement and widening skills gaps, upskilling across all areas of the business and not just within technical teams can help to empower people and organisations to navigate the evolving data and AI landscape. As part of Scotland’s Innovation Infrastructure, The Data Lab works with partners, stakeholders, and the community to help drive this change.”