The scale of the unemployment challenge in 2021 and the years ahead will be huge. The Office for Budget Responsibility’s (OBR) Economic and Fiscal Outlook for November 2020 central estimate for  unemployment is that it will rise to 7.5% next year. In their downside scenario, it could peak as high as 11%. It also estimated that it will take several years to return to 2019 levels. Youth unemployment is likely to be higher than the top line unemployment figures.

With unemployment levels expected to peak next year, demographic changes, and from experience of past recessions, it is likely that we will see an increase in UK-based student numbers over the next few years. The OBR’s forecast made this exact assumption, projecting  that student numbers will increase as “a larger proportion of school leavers have delayed their entry into the job market in the current academic year, and this is expected to persist in future.” Universities will likely be planning how to effectively support more students.

Higher student numbers may well lead to even more debate on the purpose and value of higher education and how universities can best financially support an even more diverse student body. There has been much uncertainty recently over post-18 education finance, clarity is needed in a way that recognises the increasingly valuable role of universities.

The diversification of pathways into higher education has allowed more people to develop higher level skills. The Collaboration Progress Monitor at the start of this report outlined a large increase in degree apprenticeships before the pandemic and a decrease in CPD/CE activities.

Department for Education (DfE) data on apprenticeship starts from 23 March to 31 July found a large decrease in starts compared to a year ago, though higher apprenticeship starts appear to be less affected. Intermediate and Advanced apprenticeship starts have decreased by 55.12% in this period. In contrast, the higher apprenticeship starts have only dropped by 3.32%. This trend needs to be closely monitored as providing apprenticeship opportunities for young people is vitally important.

The challenges of the 2021 labour market requires effective government policy as well as strong university and business collaboration.

Our recent Showcasing Collaboration booklet, Building Future Talent, Together outlined examples across the country of universities and businesses working together, trying to address these challenges. Yet enhancing this collaboration is always feasible.

Central to many examples of successful collaboration is the need to work with mutual understanding and purpose. As outlined in a previous article in this report, proximity is an essential driver of collaboration not just in terms of geography but organisational, social and institutional proximity. Viren Patel’s article highlighted the importance the Open University places on working in partnership with businesses as well as local partners and other education providers. This collaborative work builds understanding of evolving skill needs in order to develop and train people. To avoid the worst economic outcomes of the pandemic, universities and businesses must continue to look outward and develop partnerships with each other to develop the talented workers the UK needs.

Government policy announcements such as the Kickstart and Restart schemes are welcome, even though they are only for those unemployed for six and 12 months respectively and have been slow to implement. The Lifetime Skills Guarantee and more flexibility in education loans were also positive announcements. However, there are two areas that we would like to see the Government give more attention to in the March 2021 Budget and beyond.

Firstly, more encouragement could be given for businesses to hire people leaving education. In our recently published skills policy position, we argue for temporarily abolishing National Insurance Contributions for young people under the age of 25 and introducing a 50% wage subsidy for people under the age of 25 undertaking an apprenticeship, including a degree apprenticeship. Reducing the hiring would incentivise more employers to hire  young people from university and elsewhere.

Secondly, there needs to be more strategic, joined up thinking on current and future skill needs. The pandemic has also underlined the need to adapt to the future world of work and the importance of certain skills such as digital, communication, leadership and team-work. As well as adopting policies that hold back the worse, we need to be thinking of the long-term.

In our policy paper, we argue for establishing an independent body to analyse current and future skills needs of the UK. The Government establishing the Skills and Productivity Board, Green Jobs Taskforce and Office for Talent are welcome. However, there has not yet been a replacement for the UK Commission for Employment and Skills (UKCES) and with more skills policy being devolved there is a clear need for increased co-ordination with devolved governments.

It is important to note that some organisations are still hiring. There are still vacancies and in lots of sectors there are skill shortages. Encouraging people to study subjects that will lead to jobs currently hard to fill or important to the Government’s economic priorities is also important. In our position paper, we argue for waiving the student debt of graduates in occupations with significant skills shortage. Next year in our future of skills project, we will be considering this topic in more detail and developing further recommendations to make sure we are prepared for the future world of work.

The scale of the economic and employment challenges are huge. Strong collaboration and long-term, strategic thinking are essential. Our work in 2021 will be to continue to encourage this from government, businesses and universities.

First published as part of the State of the Relationship Report 2020.