The UK rail industry is currently experiencing a period of growth. Major government investment in infrastructure projects – for example, £96b of investment in the integrated rail plan – has the potential to create up to 12,000 jobs every year over the next five to ten years, on top of existing funding to maintain and operate the railways.
This opportunity for growth is exciting. However, the industry needs to find ways to respond to the skills shortages that this growth will create – and demand-led skills shortages caused by infrastructure spending are only part of the problem. Other factors are also contributing to an industry-wide skills deficit and need to be considered in finding a workable solution.
Firstly, an ageing labour force is leading to a retirement cliff edge. Nearly 50,000 rail industry employees are expected to retire by 2030. When these workers are replaced, it is often with an older person – the proportion of under 25-year-olds in the rail industry has halved since 2016, from 10 percent to five percent of the workforce.
Secondly, reliance in the industry on workers from Europe has been disrupted by the end of freedom of movement brought about by Brexit. In the past, a steady stream of talent from the continent has filled roles such as engineers and construction workers. Approximately half the Europeans in the rail supply chain have now returned to the EU.
Thirdly, apprenticeship numbers have dropped during the COVID period – and even prior to the pandemic the industry was not training enough apprentices to keep up with demand. NSAR analysis indicates that the majority of required workers will be at skill levels that are often best served by apprenticeships. About 5,000 apprentices per annum, or two percent of the workforce, will be needed – effectively a doubling of current average levels.
Fourthly, modernising work practices and the use of digital technologies requires widespread upskilling of rail staff. Modernisation means that approximately 80 percent of the industry will require training over the next two decades. 200,000 workers will need new digital skills by 2030 – 110,000 needing upskilling, 80,000 needing reskilling and 10,000 new apprenticeships will need to be created and resourced.
These challenges highlight the importance of investing in people and skills. If the industry does not secure the skills it needs, it will put at risk the timelines for delivering to the Government’s planned infrastructure projects. It will also put pressure on costs and profit margins if the industry has to buy in the skills it needs in an already competitive market. The skills and people deficits being created by this combination of factors is already leading to high wage inflation.
Workforce planning is a vital component of investment in people and skills – it enables businesses to better understand their current workforce and determine their future needs. Investing time in workforce planning will yield good returns: reduced wage inflation, improved diversity and enhanced social value. Although workforce planning is relatively embryonic within rail, especially at a strategic and industry-wide level, when it is pursued the effects have been positive – as has the ability to measure the accompanying diversity and social value improvements.
Investing in training – especially apprenticeships – will be a critical way to fill skills gaps. NSAR evidence shows that £1 spent on training on rail skills in the UK results in a £3 return on that investment. As well as wider economic benefits, skills investment can make huge differences on an individual level too – giving people from all backgrounds the chance to progress in their careers. However, there is a first mover disadvantage leading to a market failure in training and apprenticeships – employers don’t train as they fear, with some justification, that staff will be poached by the competition. Reducing the barriers to training and running apprenticeship programmes, by working closely with businesses and supporting them with programme development, will lead to an increase in training of new and existing staff.
Although the rail industry may be facing pressing skills shortages, there are many steps businesses can take to begin addressing these shortages and planning for the future. Talk to NSAR about how we can help you develop and sustain a highly skilled workforce.
Neil Robertson
NSAR Chief Executive