Solving the UK skills puzzle: what the data really shows

By Dr Michele Palladino

The UK faces a complex skills puzzle: strong higher-education attainment and a growing STEM workforce coexist with persistent shortages in engineering talent, limited vocational training pathways, and some of the highest qualification and skills mismatches in the OECD. These tensions pose a significant challenge for an economy aiming to lead in science, technology and advanced manufacturing.

Using insights from Cambridge Industrial Innovation Policy’s UK Innovation Report, this blog examines the strengths and weaknesses of the UK’s skills landscape and how they affect its capacity for innovation.

The importance of skills in the current policy debate

The importance of skills extends beyond educational achievements; they are vital drivers of industrial transformation and competitiveness. In the UK, this is a key focus of current policy discussions. The UK Modern Industrial Strategy emphasises that a strong workforce with the right capabilities is essential for fostering growth and innovation. Without a robust STEM skills base, the UK risks falling behind in sectors such as manufacturing, digital technology, clean energy, and other high-growth industries.

Similarly, the UK Science and Technology Framework identifies “talent and skills” as one of ten strategic levers necessary to embed science and technology at the heart of national economic progress. Building and maintaining a highly skilled workforce is therefore crucial for the UK to remain a leader in science and technology.

The UK has high tertiary attainment and strong STEM output

The UK stands out among the OECD countries for tertiary education attainment levels: in 2023, 60.6% of the UK’s 25–34-year‑old population held a university degree, compared to the OECD average of 47.6%. Graduates in STEM disciplines (Science, Technology, Engineering and Mathematics) are of particular importance to innovation activities, and the UK also has a relatively high proportion of STEM graduates. In 2022, the UK produced 227,860 graduates with a tertiary education degree in STEM disciplines, and 155,831 graduates in health and welfare, together representing 39% of total graduates. This is in line with other G7 countries, where in the same year the share of graduates in STEM plus health and welfare disciplines represented between 36% and 44% of total graduates (Figure 1).

These data indicate that the UK is well‑placed in terms of formal higher education performance. However, this seemingly positive outlook conceals a number of serious mismatches and gaps.

The STEM sub-disciplines of engineering, manufacturing and construction skills remain in short supply

The breakdown of graduates in STEM degrees shows, however, that in 2022, UK graduates in the STEM sub-discipline of engineering, manufacturing, and construction accounted for 9.3% of the country’s total graduates, which is below the G7 average (13.9%) and only higher than the USA, with 6.9%. Considering that engineering, manufacturing, and construction support innovation and industrial renewal, this shortfall is striking (Figure 1).

The UK has a persistent “missing middle” in vocational and technical education

Compared to the OECD, the UK has a lower share of workers with a vocational education that provides the technical skills needed in modern industrial processes. In 2023, 22% of the 25-34-year-old population in the UK had pursued vocational education (including upper-secondary, post-secondary, and short-cycle tertiary education). This number is below the OECD average (31%) and European peers such as France (41%), Germany (37%) and Italy (36%) (Figure 2). This is a long-lasting problem of the UK job market. As discussed in previous editions of the UK Innovation Report, some analyses have argued that the UK education system is marked by a “missing middle” of higher technical education: enrolment in post-secondary education, and short-cycle tertiary education.

Post-secondary education is not sufficiently complex to be tertiary education and prepares students to enter the job market (or pursue tertiary education), while short-cycle tertiary education courses are often practically based, preparing students to enter the labour market. The lack of those skills may affect the economy’s competitiveness, as the job market requires a variety of skills that are not always provided by standard three-year Bachelor’s degrees.

Skills and qualification mismatches are among the highest in the OECD

According to OECD data (Figure 3), the UK presents several mismatches in the job market, including:

• Qualification mismatch: 37% of workers in the UK think their qualification is above the level required for their job, against 23% of the OECD average.
• Skills mismatch: 34% of UK workers report they are over-skilled for their current job, against 26% of the OECD average.
• Field of study mismatch: 41% of workers in the UK report that their field of study is not related to the most relevant field for their job, compared with 38% across the OECD.

These mismatches suggest that although the UK has many highly educated workers, the education‑to‑employment pathways are not functioning effectively.

Meeting future demand requires better alignment between education, industry and emerging technologies

In 2023, the UK workforce in STEM occupations accounted for 28.7% of the total workforce – 9.4 million people – and has grown by 22% since 2013, nearly double the growth rate of all occupations. Projections suggest that with faster technological adoption and automation, the UK STEM workforce may grow by 6% to 10% between 2023 and 2030 (Figure 4).

Meeting this increasing demand will require producing graduates in the right fields, strengthening vocational pathways, improving industry‑education alignment, and ensuring that skills meet the needs of emerging industries.

The UK’s high levels of tertiary attainment and strong STEM output provide a solid foundation, but closing gaps in engineering disciplines, reducing qualification mismatches, and expanding vocational and technical education will be essential. The UK is not short of educated people, but it lacks the right fit. Addressing the skills challenge is crucial if the country is to fully realise its innovation potential into productive capacity and long‑term competitiveness.

This article draws from Section 4 of the UK Innovation Report 2025.

For data and more analysis on the UK’s competitive advantage in industrial innovation, see the full UK Innovation Report 2025 produced by Cambridge Industrial Innovation Policy.