What Is the Skills Gap and How Can Businesses Fix It?

The skills gap remains one of the biggest challenges facing UK employers.

Technology is changing how organisations operate. AI tools are reshaping workflows. Digital capability requirements continue to grow across industries. At the same time, many employers are struggling to recruit candidates with the skills they need.

According to the World Economic Forum's Future of Jobs Report 2025, skills gaps are the leading barrier to business transformation globally, cited by 63% of employers, with almost 40% of core workplace skills expected to change by 2030. Closer to home, the government's Employer Skills Survey 2024 found around 1.08 million employees in England currently have skills gaps, with 12% of employers reporting shortfalls in their workforce.

For employers, understanding and addressing the skills gap is no longer a workforce planning exercise that can sit on the to-do list. It has become a business priority.

What is the skills gap?

The skills gap is the difference between the skills your organisation needs and the skills currently available within your workforce.

This can appear in several ways:

• Employees missing technical or role-specific knowledge
• Gaps in digital capability or data literacy
• Weaknesses in leadership, communication, or management skills
• Shortages of specialist talent during recruitment
• Outdated skills that no longer match changing job requirements

Skills gaps are not limited to specialist industries. They affect businesses across sectors, from manufacturing and engineering to healthcare, retail, logistics, and professional services. As jobs evolve, businesses often discover that previous training or experience no longer fully matches current demands.

How does the skills gap affect businesses?

Skills shortages have a direct impact on business performance.

When employees lack the skills required to complete tasks effectively, work may take longer, quality can suffer, and managers often spend more time filling operational gaps rather than focusing on strategic priorities.

Common business impacts include reduced productivity, slower delivery times, lower quality outputs, increased operational costs, recruitment difficulties, reduced innovation capacity, higher employee turnover, and barriers to growth.

The wider labour market adds pressure too. According to the British Chambers of Commerce, 75% of UK employers are currently struggling to find staff with the skills they need, which is one reason so many are shifting attention towards internal development and targeted upskilling.

Where are the biggest skills gaps in 2026?

While some shortages are industry-specific, several skill categories consistently appear across UK workplaces.

Digital and AI skills

Digital capability has moved far beyond basic software knowledge. Employees increasingly need confidence using cloud systems, workplace platforms, data tools, cybersecurity practices, automation workflows, and AI-enabled technologies. The rapid growth of generative AI has accelerated this shift considerably.

The World Economic Forum identifies AI, big data, cybersecurity, and technology literacy among the fastest-growing skill areas to 2030, while analytical thinking, resilience, and collaboration remain equally critical.

Many businesses assume employees will naturally build digital skills through day-to-day exposure to technology. In practice, capability often develops unevenly across teams. Without structured development, digital gaps can contribute to inefficiency, security risks, compliance issues, and inconsistent customer experiences. From April 2026, new government-funded apprenticeship units in AI and digital skills are being rolled out to help employers address this gap.

Leadership and management skills

Strong managers play a major role in employee engagement, operational performance, and organisational culture. Yet management capability gaps remain common.

Employees are often promoted because of technical expertise or industry experience rather than formal leadership training. Managing people, budgets, change, communication, and performance requires a broader skill set. Skills England's assessment of priority skills to 2030 identifies leadership and management as a critical growth area.

When management capability is weak, businesses may see poor communication, reduced engagement, inconsistent performance, and higher staff turnover. Leadership development, management apprenticeships, and coaching can help employers build stronger capability pipelines.

Functional and workplace skills

Functional skills continue to matter across modern workplaces. English, maths, communication, problem-solving, and workplace confidence influence performance across a wide range of roles.

Some employees may avoid discussing skills challenges because they fear being judged or overlooked for progression. As a result, issues can remain hidden and affect efficiency, confidence, and career progression over time.

How to identify the skills gap in your business

The most effective way to understand workforce capability is through a structured skills gap analysis.

Start with your organisation's goals: growth plans, technology adoption, regulatory requirements, and future capability needs. Your skills strategy should reflect where the business is heading, not only where it is today.

From there, map the capabilities required across departments and roles, then assess what your workforce currently has through performance reviews, skills audits, and employee self-assessments. The difference between what you need and what you have tells you where to focus your development investment.

How can employers fix the skills gap?

Once skills gaps are identified, employers typically have two broad options: recruit new talent or develop existing employees. In reality, most organisations use a combination of both.

Recruit for potential, not only experience

Hiring employees who already possess specialist skills can fill urgent capability gaps. However, competitive labour markets can make this difficult and expensive. An alternative is to recruit for attitude and growth potential, then develop role-specific skills through structured training. Recruiting apprentices supports this strategy directly.

Upskill existing employees

For many businesses, upskilling existing employees offers a faster and more cost-effective solution than external recruitment alone. Current employees already understand organisational systems, customers, culture, and business processes. Training can focus on the specific skills needed to strengthen performance.

Benefits include faster capability development, improved retention, stronger adaptability, better succession planning, and higher employee engagement.

From April 2026, the government has introduced new apprenticeship units in AI, leadership, engineering, and clean energy, designed to help employers develop existing staff. At Total People, we offer apprenticeships across more than 30 sectors alongside short courses tailored to targeted skills development.

Building a future-ready workforce with Total People

Skills gaps are unlikely to disappear. As technology, AI adoption, and labour market demands continue to evolve, employers will need adaptable workforce strategies that balance recruitment, development, and long-term capability building.

Organisations that invest in identifying and closing skills gaps are better positioned to improve productivity, strengthen retention, and support sustainable growth.

Looking to address skills gaps in your organisation? Explore upskilling options for employers, or contact us about apprenticeships, training, and workforce development solutions tailored to your business needs.