A new report from Skills England reveals critical gaps in the UK’s skills system. It stresses a need for shorter, more flexible apprenticeships and warns that persistent skills shortages could undermine the government’s growth ambitions.

The report, based on responses from 743 stakeholders across 10 priority sectors, found that skills shortages had created 52% of construction vacancies with 42% un-fillable manufacturing roles. A dramatic increase since 2017.

Skills England’s analysis reveals that technological change, particularly AI and automation, is driving unprecedented demand for new skills across all sectors. In the creative industries alone, 69% of employers expect their staff to need skills upgrades to handle new technologies and equipment.

The report also identifies demographic inequalities that contribute to skills gaps. Women remain substantially underrepresented in over half of the priority sectors, including advanced manufacturing, clean energy, construction, and digital technology. Meanwhile, only 26% of creative industry workers come from lower socioeconomic backgrounds, compared to 38% across all industries.

Laura Miller, UK People Country Lead, SD Worx said,“The growing skills gap highlighted in the Skills England report makes one thing clear: businesses must take a proactive role in shaping their workforce of the future. Upskilling is absolutely essential, but to do it well, organisations need to go beyond short-term fixes and create the right environment for people to thrive. That means focusing on employee wellbeing, engagement and experience.

Employers express a strong appetite for two key reforms: foundation apprenticeships, to provide broader entry level training, and shorter duration apprenticeships, to allow for faster learning and accommodate experienced participants.

Automation is already disrupting the financial services sector with it potentially creating up to 584,000 new jobs by 2040. These roles will require advanced technical skills in cloud development, AI, and cybersecurity, combined with traditional regulatory knowledge.

In clean energy, the government’s Clean Power 2030 Action Plan is expected to create between 135,000-725,000 net new jobs, but rapid technological advancement means traditional training routes cannot keep pace with demand.

The report highlights three critical system failures: that apprenticeships respond too slowly to technological change, that content and delivery frameworks are overly restrictive and that small and medium enterprises struggle with administrative burdens.

By 2035, 48% of the workforce is projected to hold degree-level qualifications, up from 39% in 2024. However, the report warns of intense competition for STEM graduates across sectors, with quantum and AI occupations seeing 67% and 72% of early-career workers respectively holding higher education qualifications.

The report also emphasises the growing importance of Higher Technical Qualifications (levels 4-5) to bridge the gap between A-levels and degrees, with 35% of critical demand occupations requiring these intermediate skills.

Miller added, “Internal mobility plays a huge part in this. When employees have clear, supported career paths and opportunities to grow, it strengthens retention and helps future-proof businesses against talent shortages. A responsive and inclusive skills strategy – one that enables continuous learning and works for people in every region – is no longer optional. It’s a business imperative.”

Skills England will work with Strategic Authorities and Employer Representative Bodies to align training provision with local needs. The new Growth and Skills Levy, introduced by the Labour government, will fund these expanded training options while supporting the government’s missions around economic growth, NHS improvement, and clean energy transition.

Addressing these skills challenges, the report states, will be "critical to securing the future workforce in priority sectors" and essential for delivering the government’s industrial strategy ambitions.