By Dave Phoenix, Vice-Chancellor at The Open University
The UK’s skills shortage is not simply a labour market problem; it is a partnership problem. Employers need people with the right capabilities and experience, while too many individuals – particularly young people – struggle to find routes into learning and work that fit their lives. Closing that gap will require universities, businesses, colleges and government to work together much more deliberately.
The latest Open University Business Barometer, which has charted the UK skills landscape since 2017, found that 57% of employers are experiencing skills shortages, up from 54% last year, and 42% believe those shortages will worsen over the next five years. These findings underline the need for a stronger university-business compact that puts work-based education, flexible pathways and employer co-design at the centre of skills development.
At the same time, more than one million young people aged 16-24 are not in education, employment or training (NEET). The question is: how do we build pathways that connect potential with opportunity, rather than leaving employers searching for work-ready talent that the system has not helped develop?
The answer lies in partnership-led, work-based education that enables people to learn while they earn and build higher-level skills in direct connection with employer need. Education is more than training: it helps people understand why a task matters and keep learning as work evolves.
From skills shortage to shared responsibility
This year’s Business Barometer focuses on NEETs because they represent one of the UK’s largest and most overlooked talent pipelines, and points to a broader need for modular, flexible and work-relevant learning.
A second survey of NEETs found that 68% would be willing to upskill if it helped them secure employment or progress in their careers, and four in five would stay longer at a company that trained them beyond their immediate role. The appetite to learn is there, but the routes into learning and work are too often fragmented, inflexible or disconnected from the realities of employment.
Why work-based education matters
For many learners, especially those already in work or trying to enter it, traditional full-time routes in education are not enough. The UK needs more opportunities at levels 4 and 5, but also appropriate level 6 and higher-level provision that can be accessed flexibly and applied directly in the workplace.
Universities have a central role to play here, not only as providers of degrees, but as long-term partners in workforce development. That means working with employers to design curricula, support progression routes, recognise prior learning and create provision that allows people to move between work and study over their careers. It also means protecting the deeper purpose of education: developing critical understanding, confidence and the ability to apply knowledge in unfamiliar settings.
This is particularly important as artificial intelligence reshapes entry-level work. Our report found that nearly one in five employers are reducing recruitment into early-career roles, and among those organisations, 42% attribute that reduction at least in part to AI taking on tasks previously undertaken by junior employees. If early-career roles become fewer or narrower, work-based learning and progression pathways become even more important.
Partnership as the delivery model
This is where the agenda of the National Centre for Universities and Business is so important. NCUB has consistently argued that collaboration between universities and businesses is essential to developing future skills and ensuring higher education responds to a fast-changing labour market.
That collaboration must now move from aspiration to delivery. Employers should not be treated simply as end-users of qualifications, and universities should not be seen only as suppliers of graduates. Both need to work together as co-designers of skills pipelines, especially in sectors facing acute shortages or rapid technological change.
That means more shared curriculum design, more employer-supported learning, more high-quality work placements, and stronger local and regional partnerships built around education as well as training – helping learners connect theory with practice.
The Open University provides a flexible, national framework across the UK to help people learn where they live and work, enabling employers to support progression without requiring people to step away from employment. Our partnership with Microsoft has created a free AI learning hub that helps people of all ages build confidence and capability in artificial intelligence, while our collaboration with Uber Eats gives couriers access to funded Open University study for themselves or family members. Meanwhile, our Care Experienced Scholarship, delivered with the John Lewis Partnership through its Building Happier Futures initiative, is helping young people with care experience access higher education.
These partnerships differ in scale and focus, but share a common principle: skills development works best when employers, universities and learners have a shared stake in success.
A practical compact for growth
If the UK is to respond to skills shortages, economic inactivity and the disruption of AI, it needs a more practical compact between universities and business. For universities, this means deepening engagement with employers while retaining the breadth and rigour of higher education. For businesses, it means seeing education and training as strategic investment, not discretionary cost. For government, it means creating policy and funding conditions that reward collaboration, flexibility and progression.
The UK’s skills challenge will not be solved by universities and businesses working in parallel, or by treating skills simply as short-term training. It requires stronger educational partnerships that connect learning with work and support people to develop the confidence they need throughout their careers.
There is no shortage of potential. Young people want to learn, employers need talent and universities have the capability to help bridge the gap. What matters now is building the partnerships, pathways and work-based education models that turn that potential into national productivity and personal opportunity.
You can download our Business Barometer report from our website.
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