Mind the Gap: New research reveals the cost of the engineering and manufacturing skills gap

Enginuity has today launched Mind the Gap, a major new research report examining the scale, causes and cost of skills shortages and skills gaps across the UK's engineering and manufacturing sector.

Drawing on extensive research with employers and independent analysis by SQW, the report provides one of the clearest pictures yet of how workforce challenges are affecting productivity, growth and competitiveness across the sector.

The findings reveal that skills shortages and skills gaps are costing UK engineering and manufacturing businesses an estimated £5.2 billion every year – equivalent to around 2% of the sector's annual output.

The research highlights the significant impact that workforce challenges are having on businesses of all sizes, particularly SMEs, which form the backbone of the sector.

Key findings

The report found that:

• Around 50% of engineering and manufacturing SMEs report experiencing skills gaps or skills shortages.
• Skills gaps affect approximately one in five employees within impacted businesses.
• Technical manual skills remain the most sought-after capability, cited by 74% of SMEs.
• Demand is also growing for digital, leadership and soft skills.
• Lost productivity is the most significant consequence of skills challenges, with 41% of firms identifying it as the biggest cost.
• Businesses affected by skills shortages and gaps may lose, on average, up to £110,000 annually, equivalent to around 10% of their Gross Value Added (GVA).

The report identifies several factors driving these challenges, including an ageing workforce, a limited talent pipeline, changing workforce expectations and persistent misconceptions about careers in engineering and manufacturing.

Recommendations for action

The report also sets out six recommendations for employers, policymakers and education providers, including exploring the case for a skills tax credit, strengthening employer-led qualifications, improving careers education and scaling successful regional collaboration models.

Read the report

The UK's engineering and manufacturing sector has a critical role to play in driving economic growth, driving innovation and supporting the transition to a greener economy. Ensuring businesses can access the skills they need will be essential to unlocking that potential.

Mind the Gap is available to download now.

Download Enginuity's Mind the Gap report