New report reveals Wales has the UK’s highest skills shortage – but young people are ready to step up

A MAJOR new report by The Open University has revealed a growing disconnect between Welsh employers and the next generation of workers, potentially undermining efforts to tackle the country’s persistent skills shortages.

The Business Barometer 2025: Skills for today and tomorrow surveyed over 2,000 business leaders and 1,000 Gen Z adults across the UK — including 139 employers and 80 young people under 25 in Wales. It found that 58% of Welsh organisations are currently experiencing a skills shortage — the highest of all UK nations.

Yet despite this, only 31% of those employers have specific initiatives in place to recruit, retain or train under-25s.

Gen Z ready to respond — but need support

Encouragingly, over half (54%) of young people surveyed in Wales are aware of the national skills gap and are actively considering it in their career planning:

• 73% are choosing careers based on areas of high demand
• 66% say they would stay longer with employers who offer training and development

However, the report suggests that this willingness is not being met with sufficient guidance or opportunity — especially in fast-growing areas such as artificial intelligence (AI), digital, and green skills.

While 58% of Welsh Gen Z respondents say they are interested or already working in AI, one in five Welsh employers report lacking confidence in their ability to deliver AI strategies due to talent shortages.

Call for action on training and inclusion

Dr Scott McKenzie, Assistant Director for Learning, Skills and Innovation at The Open University in Wales, said: “The data is clear: there’s a mismatch between employer intentions and practical action. But there’s also a real opportunity. Welsh organisations can bridge the gap by developing structured skills plans, investing in flexible learning, and opening pathways to a more diverse talent pool. Those who act now will be the ones best placed to thrive in the future.”

Baroness Martha Lane Fox CBE, Chancellor of The Open University, added: “Young people are motivated, digitally savvy and want to contribute. Employers must meet that energy with training pathways and real opportunities. Waiting for skills to arrive is no longer enough — smart organisations will build them proactively.”

Diversity still lagging behind

While 80% of Welsh employers say equality, diversity and inclusion (ED&I) is important to their organisation, 25% admit to having no initiatives in place for underrepresented groups such as returners, career changers, or people with disabilities and neurodivergences.

This is seen as a missed opportunity to reduce economic inactivity and broaden the talent pipeline — especially in sectors where workforce shortages are most acute.

Skills shortage set to worsen

The Business Barometer, now in its ninth year, shows the issue is far from easing. In Wales:

• 38% of employers expect the skills gap to worsen over the next five years
• 60% say shortages are increasing workloads on existing staff
• 43% report reduced productivity
• 37% have scaled back growth plans
• 20% fear they won’t be able to meet their AI ambitions by 2030

Yet, despite these pressures, only 36% of Welsh employers have a formal skills plan in place. And while training is proven to aid staff retention, 30% say they hesitate to invest in staff development for fear employees will leave.

Full report and recommendations available at: https://business.open.ac.uk/business-barometer

AN ORGANISATION representing training providers across Wales is calling on allpolitical parties and2026 Senedd election candidates to commit to doubling investment in apprenticeships to support 200,000 apprentices over the next Senedd term.

Launched today (June 24), the National Training Federation for Wales (NTFW) ‘Manifesto for Apprenticeships: Building a Skills First Economy for Wales’ seeks to “build a Wales that thrives on skills, opportunity and ambition for everyone.”

According to the Centre for Economics and Business Research, doubling the investment in apprenticeships over the next Senedd term could generate an extra £3.4 billion in additional lifetime earnings for people in Wales over the next 30 years.

“Apprenticeships are not just a pathway to employment; they are the backbone of a prosperous Welsh economy, equipping people across all backgrounds with hands-on skills tailored to the needs of our industries,” says the NTFW manifesto.

“Investing in apprenticeships is an investment in people and in the future of Wales. With fair funding, inclusive access and strong partnerships, apprenticeships can help power a more equal, skilled and resilient nation.

“NTFW urges all Senedd candidates and political parties to commit to this vision. Let’s build a Wales that thrives on skills, opportunity and ambition for everyone.”

Collaboration is a key word throughout the manifesto, as the NTFW seeks to work in partnership with the Welsh Government, Medr, training providers, employers, learners, the Federation of Small Businesses (FSB), Confederation of British Industry (CBI) and the Coleg Cymraeg Cenedlaethol.

“By collaborating closely with Medr, we can ensure apprenticeship programmes are responsive, innovative and aligned with emerging industry needs,” states the manifesto.

“By working together, we can shape apprenticeship programmes that directly address skills gaps, boost productivity and support economic diversification.”

The NTFW commits to providing equal access to qualifications delivered through the medium of Welsh or bilingually and calls on the next Welsh Government to prioritise mental health and wellbeing support services for apprentices.

The manifesto calls on the next Welsh Government to restore money cut from the apprenticeship budget last year and tointroduce long-term, sustainable funding that offers equity with other forms of post-16 education.

It says apprenticeships must be placed at the heart of government policy and calls for a vocational skills strategy, developed in partnership with providers, to determine what is needed to maximise opportunities.

The manifesto also calls for:

• a skills system that speaks to the aspirations of a Welsh economy.
• people of all ages and backgrounds to be able to retrain or upskill through apprenticeships, driving social mobility and inclusive growth.
• increased funding for apprenticeships in growing sectors, such as green energy, digital innovation and healthcare, to future-proof Wales’s workforce.
• Apprenticeship opportunities in every part of Wales to support local economies, reduce inequalities and empower communities.

Speakers at the launch, held at St. David’s Hotel, Cardiff Bay, were NTFW chair John Nash, strategic director Lisa Mytton, FSB Head of Wales, Ben Cottam, Coleg Cymraeg Cenedlaethol chief executive, Ioan Matthews, and Cavendish Cymru director Nerys Evans.

Lisa Mytton, NTFW strategic director, said: “We have launched this manifesto to set out what we expect an incoming Welsh Government to prioritise in their policies and skills strategy to boost the economy of Wales.

“Our mandate to the next government is to ensure that increased investment is available for apprenticeships. We are seeking that commitment from all candidates running for the next Senedd election.”

John Nash, chairman of NTFW, added: “This is an unprecedented moment. We have created an ambitious Manifesto for Apprenticeships that should be essential reading for every Senedd candidate.

“We are seeking a commitment from all political parties that apprenticeships will be at the heart of future Wesh Government policies to grow a prosperous and resilient Welsh economy with a highly skilled workforce.”

Picture caption:

NTFW wants investment in apprenticeships to double to support 200,000 apprentices over the next Senedd term.

EQUITY investment in Wales showed resilience during 2024, defying the broader UK trend of declining activity, according to the British Business Bank’s annual Small Business Equity Tracker.

While the UK overall saw equity deals fall by 15.1%, Wales recorded a notable 7.2% rise in equity deal numbers compared to 2023. However, the total value of investments in Wales dropped by 12.1%, settling at £113 million, highlighting ongoing caution among investors.

Supporting this growth, the Investment Fund for Wales (IFW), launched in late 2023, has deployed £18 million from its £50 million equity fund. This investment has drawn an additional £3.1 million from private co-investors, with expectations of increased activity throughout 2025 as IFW managers Foresight expand their deal pipeline.

AI sector leads UK equity growth

Across the UK, artificial intelligence (AI) attracted significantly larger equity deals than other sectors, averaging £8.3 million per transaction—over 40% higher than the £5.7 million national average. At the growth stage, AI investments averaged £36.3 million, more than double comparable sectors, reflecting substantial investor interest.

In Wales, this trend was exemplified by the IFW and Development Bank of Wales’ recent investment in Nisien.AI, a promising Cardiff University spin-out. Nisien.AI is developing advanced AI technology aimed at combating online harms, including digital conflicts, and already works with major global social media platforms. The new funding will support recruitment and R&D, enabling Nisien.AI to launch new digital safety products.

Susan Nightingale, UK Network Director for Wales at the British Business Bank, commented: “Despite a challenging year for equity finance across the UK, Wales has demonstrated resilience with increased deal numbers. However, the overall drop in investment values shows that caution remains prevalent. Encouragingly, AI continues to drive significant value, and companies like Nisien.AI highlight the potential for Wales to become a key player in this transformational sector. We aim to help create the conditions for Wales’ first unicorn to emerge.”

University spinouts reach record heights

University spinout companies across the UK experienced a record-breaking year in 2024, raising £1.9 billion, accounting for 17% of total UK equity investments and 12% of overall deals. Swansea University notably led the Welsh scene, launching 58 spinouts since 2011, ranking ninth in the UK and top in Wales, as highlighted in Beauhurst’s recent Spotlight on Spinouts report.

Business angels continue crucial support

The Small Business Equity Tracker also highlighted the vital role of business angels, with 70% investing predominantly in early-stage businesses. Notably, 64% of surveyed UK angel investors either maintained or increased their investment levels between 2023 and 2024.

The British Business Bank’s initiatives, such as the Female-led Angel Syndication Pilot launched in 2023, have supported this vital investor segment. Women Angels of Wales (WAW), backed by both the British Business Bank and Development Bank of Wales, attracted over 20 investors since mid-2023, closing deals worth £3.8 million. A standout investment was in Kaydiar, a Cardiff Metropolitan University spin-out developing innovative medical devices and prosthetics, demonstrating the impactful role angel investors continue to play in driving early-stage innovation.