Nearly one in three defence firms can’t find graduates to hire despite a youth unemployment crisis, a new report has found, as universities have been urged to work more closely with businesses. 

Research by the University of Manchester and CBI Economics has suggested that skills shortages among young people has made it more difficult for defence employers to recruit Brits. 

The report into universities’ impact on business found that nearly three quarters of defence firms already engage with universities although many were suffering from a skills gap. 

A survey of around 460 businesses showed that around one in five said graduates lacked the skills needed, with the figure rising for defence firms. Around 31 per cent of defence firms said they were experiencing a skills shortage compared to 27 per cent for clean energy industries and 25 per cent for financial services employers. 

The new report has been published just as the government is scrambling to find ways to fund an uplift in defence spending, with officials tussling over when the UK could spent three per cent of GDP on the armed forces and security.  

Defence firms face ‘quantity issue’ over skills

The findings reflect the country’s struggles to upgrade Britain’s military capabilities and curb youth unemployment, which is at an 11-year high. 

The main impact of a skills shortage to limits productivity and prevents firms from expanding into new markets, according to research. 

Most firms said the main issues came around sector-specific technical skills and subject knowledge in science, technology, engineering and mathematics. 

Professor Duncan Ivison, president and vice-chancellor of the University of Manchester, called on universities to be “more ambitious, more responsive and more outward-looking in how we work with employers and entrepreneurs”. 

He said: “The issue is not whether the UK produces highly skilled people. It is whether those skills can be connected quickly and effectively to the places, sectors, communities, and businesses that need them most.”

Businesses responding to researchers blamed the costs of administrative processes for research and development (R&D) tax reliefs. Some tax relief schemes were merged under the previous Conservative government to prevent abuse while overseas subcontracting has also been restricted. Respondents said there were issues with “how certain costs are classified”, preventing them from working with universities on R&D. 

Firms also said there was a “quantity issue” with the number of skilled graduates available to hire. 

The recent Alan Milburn report suggested that around one in seven young people not in education, employment or training – Neets for short – held a university degree. 

Milburn said that the government should focus on improving outcomes of employment for graduates rather than on the quality of qualifications gained. He will set out his full recommendations later this year. 

At last year’s Labour Party conference, Sir Keir Starmer announced the government would ditch a target to get 50 per cent of school-leavers into university. 

He said there would be a new target towards getting two thirds of young people on a “gold standard apprenticeship” by the age of 25, shifting the emphasis towards employment prospects.