Skills for the future report

Closing the skills gap

Northern Ireland must tackle skills shortages locally to undergo economic growth, the Assembly’s Committee for the Economy has heard.

Speaking before the Northern Ireland Assembly’s Committee for the Economy in March 2024, then-Minister for the Economy, Conor Murphy MLA encouraged decision-makers to see a positive vision for the skills outlook in Northern Ireland, arguing that overemphasis on the well-documented skills gap in Northern Ireland is “actually under-playing what is the key focus” of the Executive’s job creation agenda, particularly regarding foreign direct investment.

Murphy, who has now been replaced by Deirdre Hargey MLA on an interim basis, said that “the primary thing that brings people here for foreign direct investment is the skills”, adding that to foster further foreign direct investment, there is a need for “language that has positivity”.

However, Murphy also outlined the Department for the Economy (DfE) has had its overall budget reduced by £74 million since 2021, an equivalent of a 9 per cent real-term decrease, and stated that it was “not adequate enough to enable investment in skills which we need to grow the economy”.

The Minister highlighted the role of skills in ambitions to close Northern Ireland’s productivity gap: “Productivity is a fundamental driver of overall living standards… Investment in skills, research and development, and innovation will also drive better productivity.”

Skills gap

Published in the Open University’s annual Business Barometer 2021 report reveals nearly three-quarters (69 per cent) of Northern Ireland businesses believe there is a skills shortage in their organisation. This percentage is the highest of any region of the UK (67 per cent in England, 60 per cent in Wales, 63 per cent in Scotland).

Northern Ireland has a much higher economic inactivity rate (26.3 per cent in September 2023) among the working age population than the UK average (20.9 per cent), largely attributed to long-term sickness.

Addressing the challenge, Murphy identified the better skills provision as a means of reducing the levels of economic inactivity.

Dual market access

The Minister highlights the potential for Northern Ireland to bridge the skills gap by utilising the dual market access Northern Ireland has acquired post-Brexit.

“If we want to try and achieve growth, if we want to take advantage of the dual market access, we need to make sure that we have sufficiently employed skilled people for employment to enable our local businesses to grow and to get into the export markets. Also, in terms of tracking foreign direct investment, we need to have people available for work,” he stated.

Apprenticeship programmes

According to a Chartered Institute of Personnel and Development (CIPD) report published in February 2024, Northern Ireland has the lowest rate of apprenticeship participation per capita in employment (14 per cent) out of all four UK regions.

Responding to a question from Alliance MLA Sorcha Eastwood, Murphy acknowledged that there is financial pressure on DfE owing to the post-Brexit removal of “European funding which was primarily used to support [skills funding] and that has not been replaced”.

With the committee meeting taking place prior to the announcement of the 2024/2025 Budget, Murphy stated that DfE had been bidding for additional funding for his department, including a further £78 million in resource funding and £360 million in capital funding.

“There is a recognition across the Executive that growing the economy is a priority. For us, this is a key component of growing the economy so we would expect broad support for those bids,” Murphy suggested.

Ring-fenced skills fund

Responding to an assertion by Sorcha Eastwood that there is a need for a ring-fenced skills fund within DfE, Murphy acknowledged: “We cannot grow the economy unless we get more people with more skills into it. Other than that, it will stay still.

“The opportunities that exist now in terms of dual market access and our own business has been very ambitious… If our baselines were increased, you could be in the space of having a ring-fenced protected skills fund.”

Murphy further referenced discussions between the First Minister, deputy First Minister, and Finance Minister with the UK Government in relation to Northern Ireland’s fiscal framework, stating: “If we get the fiscal floor issue right, all of the departments will have more baseline money.”

2023/24 budget

In the 2023/24 Northern Ireland budget, the Departmental Resource DEL budgets includes £766.6 million for the Department for the Economy.

The Department’s reduction is 1.3 per cent against its 2022/23 year-end position, highlighting that DfE will face difficult decisions in the financial year ahead in bridging the skills gap in Northern Ireland.

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