Addressing the digital-skills crisis will lead to long-term growth

The digital economy is of ever-increasing importance to businesses across the UK, and in Warwickshire as much as anywhere - yet this most vital sector is facing a skills crisis.

But it is a situation which, while challenging in the short term, holds considerable long-term potential for the county's business to grow its economic output. Warwickshire County Council economist Natalie Henderson explains.

It is recognised that, on a national basis, boosting the UK’s digital economy is a highly important factor for long-term economic prosperity.

Business Matters, a leading UK magazine for SMEs, recently reported that the digital economy accounts for over a third of overall GDP - with that figure predicted to grow to over £764bn by 2020.

In Warwickshire, the role of the digital economy for future growth will be very significant. South Warwickshire in particular has a growing digital cluster of economic activity and, with an increasing number of IT and gaming businesses, there is strong demand for digital-tech workers in the local labour market.

Figure 1: Advertised digital-tech job growth by TTWA

Source: Labour Insight

With the inclusion of the Warwick & Stratford travel-to-work area, its significant growth rate of 143% (equivalent to 3,950 additional jobs) means that South Warwickshire nearly tripled its advertised digital job vacancies during 2014-15. Compared to Technation’s top English digital clusters, Warwick & Stratford achieved the second-highest growth behind Worcester & Malvern, with Birmingham not far behind – highlighting the strong presence of digital-tech demand in the West Midlands region.

Figure 2: Digital-tech LQ analysis by TTWA

Source: Labour Insight

Figure 2 shows the concentration of digital-tech jobs posted in 2015 relative to the national average. Outside London and the south-east, Warwick & Stratford has the highest density of 64 digital-tech jobs per 1,000 people employed when compared with Technation’s top clusters in the country. This suggests that demand for digital-tech workers in the Warwick & Stratford TTWA is higher than the national average.

The high demand for digital-tech roles is partly reflective of the growing digital skills crisis that faces Warwickshire and the rest of the UK. Nationally, the UK needs an additional 745,000 workers with digital skills by 2017; with the skills gap costing the economy around £63 billion a year in lost income. The House of Commons Science and Technology Committee recently called upon businesses to invest more and provide better training at all levels to improve long-term performance.

Within Warwickshire, a similar picture emerges. Jobs requiring the study of Mathematical & Computer Sciences and Technologies are projected to grow by 5% during 2015-22; equating to an increase of nearly 1,000 jobs across Warwickshire. Programmers and software developers are the most in demand; which shows the importance of digital-tech activity in Warwickshire.

However, one in five employers (20%) believe that the skill gaps in their workplace are caused by the introduction of new technology, with more than a quarter (27%) agreeing that they find it difficult to recruit staff with the required skills. Just under half of all employers (45%) report that less than 20% of their staff have a Level Four qualification. This highlights the difficulties in hiring higher-skilled workers to fill vacancies.

With opportunities and challenges alike facing businesses across Warwickshire, it is vital that all are addressed for the digital economy to grow further. It is important that the workforce is well-equipped with the digital skills that businesses need to expand and operate competitively. A higher-than-average number of digital-tech industries recruiting in Warwickshire ensures that there is significant potential for businesses and economic output to grow in the long term, despite difficulties faced ahead.