Skills shortage to drive training budget increases

26 April 2004 - Greater confidence in the economy, along with fears of skills shortages, is leading to more concerted investment in training and development. This is one of the main findings of the Training and Development Survey 2004 conducted by the Chartered Institute of Personnel and Development (CIPD).

The survey, launched last week at HRD 2004, showed that:

* There was little change in the size of training budgets between 2002 and 2003 but one in three private sector training managers expected to see an increase in their training budgets during 2004;

* 81% of organizations have a training budget - indicating an acceptance of the "training means business" case;

* Almost a third (32%) of respondents said that people in their organization received, on average, more than five days training per year. But almost one in five (18%) received less than three days training per year.

Warning that extra investment in training is essential in order to meet future staffing needs, Jessica Rolph, CIPD Learning, Training and Development Adviser: "If anticipated increases in training budgets do not materialise, current skills shortages could translate into wage inflation, leading to adverse implications for interest rates, growth and the economy as a whole.

"Economic uncertainty has led to a 'wait and see' approach to investment in training, but there is a danger that employers have not invested nearly enough in anticipation of impending skills deficiencies. A failure to invest now could leave employers in many sectors short of skilled labour, or needing to offer unsustainable salaries in order to fill vacancies for skilled workers."

Survey responses from the public sector showed a surprising disparity with the private sector with 30% of public sector training managers reporting a decrease in their training budgets last year (compared to 27% in the private sector)> Just over a quarter (26%) also expected their budgets to decrease next year (compared to only 17% in the private sector).

Jessica Rolph continued: "The Government has invested heavily in public services over the last year, and yet training budgets appear to have fallen. If, as it seems, the public sector is diverting money away from training and in to pay awards in order to tackle recruitment and retention difficulties, they are taking a short-term approach which could store up problems for the future.

"As the private sector recovers, competition in the labour market can only increase, so reductions in public sector training budgets are ill advised. It would be ironic if the Government's investment in public services were to be undermined by a focus on pay rather than training, leading to services suffering because the public sector is failing to equip staff with the skills to do the job."

Other main findings:

Training spend

Average training spend per employee is higher in smaller firms (possibly due to economies of scale for larger employers):

Size of firm = 25-49
Average training budget = £33,833
Spend per employee = £884.06

Size of firm = 50-99
Average training budget = £58,504
Spend per employee = £878.82

Size of firm = 100-249
Average training budget = £111,658
Spend per employee = £660.62

Size of firm = 250-499
Average training budget = £212,132
Spend per employee = £602.45

Size of firm = 500+
Average training budget = £970,429
Spend per employee = Not available

Benefits of learning

Survey respondents rated immediate job demands most highly when asked to rate the benefits of training to their organization, including:

- improvements in competence (62% said this was "a great benefit")
- behavioural skills (61%)
- technical skills (61%)
- quality of service (61%)

These responses contrasted with the lower ratings given for general organizational benefits, such as:

- job satisfaction (33%)
- staff retention (29%)
- raised commitment (27%)

Training and time constraints

Time pressures meant that 77% of respondents had to provide training in short, 'bite size' chunks. The same proportion also provided more learning materials that employees could use at times convenient for them.

Impact of Government skills initiatives

86% of respondents had contact with further or higher education institutions and 81% had dealings with Investors in People, but only 33% had contact with Sector Skills Councils and just 28% had dealt with their Regional Development Agency.

Asked to assess the effectiveness of bodies they had contact with in meeting their needs:

- 30% rated their Learning and Skills Council (or Education and Learning in Wales) as poor
- 38% rated their Sector Skills Council as poor
- 43% rated their Regional Development Agency as poor.

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