Scottish businesses ‘lack confidence in AI and green tech’

New data has found that more than half (56%) of Scottish organisations are reporting skills shortages.

This year’s Business Barometer report published by The Open University and the British Chambers of Commerce noted that this is lower than the UK average of 62% and a modest improvement on 2023 UK results, when almost three quarters (73%) reported skills shortages.

However, 23% of organisations have implemented a written skills plan for their workforce this year, hindering the ability to strategically address these issues and prepare for future demands.

While 56% of organisations reported a lack of confidence in applying new artificial intelligence (AI) and 47% in adopting green technologies, employers agree that these skills are crucial to the growth and sustainability of UK businesses and the wider economy.

Skills shortages and a lack of confidence continue to have a knock-on effect on staff morale and wellbeing, as 77% of employers say shortages have increased the workload of their employees – an indicator that employers need inclusive skills plans to fill key gaps.

The report also revealed that 38% of Scottish businesses intend to use mentoring or coaching within the next 12 months, while 32% intend to use apprenticeships over the next year.

While there is a commitment to address the skills shortage, the research also showed that the majority of businesses (52%) still do not have specific recruitment, training and retention initiatives in place for underrepresented groups, including young people, older workers, those with disabilities and neurodiverse individuals.

Baroness Martha Lane Fox, chancellor at The Open University and president of the British Chambers of Commerce, commented: “Despite tiny green shoots of improvement, the skills gap remains stubbornly high.

“What’s concerning is the critically low confidence in AI and green technology and the lack of strategic plans or initiatives to engage vital underrepresented groups – both of which are essential to addressing the pivotal challenges of our future.

“By fostering innovative strategies and inclusive initiatives, we can bridge the skills gap and build a more resilient workforce.”

David Allen, senior partnerships manager at The Open University in Scotland, commented: “While it’s encouraging that the number of Scottish businesses reporting skills shortages is lower than the UK average, the fact that over half still face these challenges indicates there’s more work ahead.“

Anna Ashton Scott, head of skills at The Data Lab, Scotland’s innovation centre for data and AI, commented: “While it’s encouraging to see Scottish businesses showing more confidence in applying AI technologies compared to their UK counterparts, more needs to be done to support the 56% of organisations lacking confidence.

“In a time of rapid technological advancement and widening skills gaps, up-skilling across all areas of the business and not just within technical teams can help to empower people and organisations to navigate the evolving data and AI landscape.”

Data comes from an online survey of 1,305 organisations across the UK conducted between April and May. Respondents were drawn from all sectors and geographies and 90% of businesses had fewer than 250 employees.

Meanwhile, new data from Grant Thornton UK suggests that the productivity of mid-sized businesses in Scotland is being dragged down by a lack of key skills.

The advisory firm’s latest Business Outlook Tracker found that half of the Scottish business leaders surveyed believe that a lack of vital skills is affecting productivity levels. Financial skills were identified as the most in need (28%), followed closely by complex practical capabilities, including technical and data skills (tied at 24%).

The survey of Scottish mid-sized regional businesses revealed that 88% were planning to invest more or the same in skills development over the next six months. Many have already established their own development programmes, with 75% of those noting they were lacking digital skills having in-house coaching to boost this.

However, 57% of the respondents who were in need of financial skills, do not currently have internal training in place.

The high-tech nature of many businesses’ productivity concerns is reflected by the fact that 90% will be investing more or the same in technology over the next six months. The growth of AI has likely been a key aspect of this, with only 14% believing that AI won’t have a positive impact on their productivity over the next year.

The survey also found that productivity issues are currently affecting almost every aspect of mid-sized businesses including their ability to export, to recruit and to train and up-skill employees.

Alongside skills shortages, other important factors impacting the productivity levels of Scottish businesses include the lack of funding for further investment (36%), increasing levels of stress and burnout amongst staff, difficulty in attracting and retaining talent, and a lack of staff engagement or low morale (all 26%).

Greater investment in skills and training was also identified as the policy area that business leaders in Scotland would most like to see the government focus on longer term. In the run-up to the election, the majority (84%) of Scottish businesses claimed to have confidence that the next UK government (of any party) will focus on prioritising long-term solutions to address productivity issues in the nation’s public and private sectors.

Stuart Preston, practice leader for Grant Thornton in Scotland, said: “It’s clear that there’s a strong demand for further investment in skills development in Scotland, with business leaders recording a need for better financial, data, and technical skills to help boost productivity.

“This lack of necessary skills development combined with difficulty in attracting and retaining talent is likely creating a snowball effect, stretching current people resources and ultimately contributing to heavy workloads and inefficiency – further exacerbating the productivity challenges facing the market and contributing to the increasing levels of staff burnout being seen in the region.

“Ahead of the election, the major parties have outlined that they are focusing on enhancing the skills and training opportunities available to the country’s workforce.

“It’s crucial then that the parties listen to what mid-sized businesses, the engine of the UK economy, are saying they need and put forward solutions to address the constraints currently hindering the growth and productivity of a core segment of our economy.”

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