The UK faces a growing talent paradox. While employers continue to report widespread skills shortages, more than one million young people remain outside education, employment or training (NEETs). As AI reshapes entry-level work, businesses risk weakening the very talent pipelines they need to secure future growth.
Findings from The Open University’s Business Barometer highlight the scale of the disconnect. While 57% of employers report skills shortages and 42% expect them to worsen, more than one million young people remain outside education, employment or training. At the same time, 43% of organisations hired fewer staff over the past year, suggesting the problem is not a lack of talent, but a failure of the system to connect talent with opportunity.
“The gap persists because it reflects a systemic mismatch between labour market demand and access to opportunity, rather than a simple shortage of talent,” says Professor Keith Schofield, executive dean of the faculty of business and law at The Open University.
The growing cost of short-term thinking
Economic uncertainty has encouraged many organisations to focus on immediate business needs rather than long-term workforce planning.
However, the Business Barometer findings suggest this approach may be creating longer-term risks. While 80% of employers say they are willing to train young people entering the workforce, only 34% offer specific initiatives for recruiting or training under-25s, and just 11% have programmes targeted at NEETs. The result is a growing gap between intent and action.
“Many organisations recognise the need for training and development. But in some organisations the approach remains dominated by short-term, costly hiring rather than long-term workforce planning,” says Schofield.
The report also found that only 39% of employers have implemented a written skills plan, suggesting workforce development often remains reactive rather than strategic.
Yet despite skills shortages affecting business performance, many organisations continue to focus on hiring ready-made talent rather than developing future capability.
“Employers are still more likely to treat skills as something to buy in rather than build systematically over time,” Schofield says.
AI cannot replace a talent pipeline
AI has added another layer of complexity. While helping organisations automate routine tasks and improve efficiency, it may also be reshaping traditional entry points into employment.
According to The Open University’s Business Barometer, 19% of employers have reduced recruitment for early-career roles. Among those organisations, 42% say the reduction is linked to AI taking on more entry-level tasks. While this may appear a rational response to technological change, entry-level roles have long been vital pathways for developing skills and experience.
“Entry-level roles have historically been critical entry points for developing skills and experience,” says Schofield. “Reducing these roles risks removing the foundation of future talent pipelines.”
If fewer young people gain access to early-career opportunities, organisations may eventually find themselves competing for an even smaller pool of experienced workers. AI may help address short-term productivity pressures, but it could also deepen long-term skills shortages if employers fail to invest in future talent.
The future workforce will need to combine technical fluency with distinctly human capabilities
That investment remains essential because the skills employers value are evolving rather than disappearing.
As AI becomes embedded across industries, demand is expected to increase for capabilities that technology struggles to replicate, including critical thinking, problem-solving, communication, collaboration and leadership. Technical fluency will matter, but so too will the distinctly human skills needed to apply technology effectively.
“The future workforce will need to combine technical fluency with distinctly human capabilities,” Schofield says.
The overlooked talent pool
Contrary to common assumptions, the majority of those currently outside education, employment or training are not choosing disengagement. The Business Barometer found that 68% would be willing to train or upskill to improve their employment prospects, while only 6% say they want to remain NEET.
Perhaps most notably, 78% say they would stay longer with an employer that offered training and development opportunities beyond their current role. The findings suggest many young people are actively looking for routes into work, but employers may need to rethink recruitment practices that prioritise existing qualifications or sector background over wider life experience and potential. Organisations that support employees with structured development, training and early career investment to obtain qualifications on the job will be better placed to build resilient workforces.
Employers should also work more closely with schools, colleges and universities to co-design courses, provide work experience, and help young people develop job-ready skills that are in demand in their sector.
Failing to engage this talent pool risks constraining innovation, weakening future skills pipelines and limiting long-term growth.
Building a stronger skills ecosystem
Closing the gap between workforce demand and workforce readiness will require collaboration.
The Business Barometer found that 75% of employers would consider working with universities or colleges to create more opportunities for young people. Such partnerships can help organisations move beyond recruitment and play a more active role in developing the talent they need.
Partnerships are increasingly becoming a practical way to bridge the gap between workforce demand and workforce readiness. The Open University, for example, works with more than 2,700 employers to develop flexible learning programmes that allow people to build skills alongside work and other commitments, helping organisations widen talent pools while developing capability from within.
The Open University’s Open Business Creators (OBC) programme responds to findings that 14% of NEETs surveyed aspire to be self-employed. Through partnerships with organisations including the British Business Bank, Santander, NatWest and Barclays Eagle Labs, it provides aspiring entrepreneurs of all ages with access to learning, guidance and funding opportunities.
Schofield added: “Complementing this, the development of a Virtual Incubator aims to support the creation and growth of sustainable, purpose-driven businesses that prioritise ethical, inclusive, and long-term value creation.”
Employers should embed skills planning into business strategy, while educators must ensure learning remains accessible and aligned with workplace needs. The UK’s skills challenge is not a lack of potential, but a failure to connect opportunity with talent.
“If the UK is serious about growth, we must act with urgency when it comes to creating opportunity and providing people with the knowledge and skills to convert such opportunity into value,” says Schofield.
In an economy increasingly shaped by technological change, organisations that invest in future talent today will be better positioned to compete tomorrow. The question is not whether businesses can afford to develop young people. It is whether they can afford not to.
To find out more on how employers can harness new talent or download the latest ‘Business Barometer’ report from The Open University, visit www.open.ac.uk/business.
The UK faces a growing talent paradox. While employers continue to report widespread skills shortages, more than one million young people remain outside education, employment or training (NEETs). As AI reshapes entry-level work, businesses risk weakening the very talent pipelines they need to secure future growth.
Findings from The Open University's Business Barometer highlight the scale of the disconnect. While 57% of employers report skills shortages and 42% expect them to worsen, more than one million young people remain outside education, employment or training. At the same time, 43% of organisations hired fewer staff over the past year, suggesting the problem is not a lack of talent, but a failure of the system to connect talent with opportunity.
"The gap persists because it reflects a systemic mismatch between labour market demand and access to opportunity, rather than a simple shortage of talent," says Professor Keith Schofield, executive dean of the faculty of business and law at The Open University.
