The Coalition for a Digital Economy (Coadec) is calling on the government to back UK tech start-ups to the tune of £100 million.
The sector advocacy group wants the investment placed in a future skills fund, to be used by people looking to retrain or upskill.
Coadec makes the proposal in a new paper, Finding a NEET solution, amid warnings that growth in the sector will be threatened if firms cannot find suitably skilled employees.
With post-pandemic unemployment predicted to rise to a peak of 5.9% next year, Coadec argues that a thriving tech sector will be key to the UK’s economic recovery.
Their report comes in the month that the UK reached the milestone of boasting 100 tech unicorns (start-up companies valued at US$1bn or more), joining the US and China as the only countries to reach a three-digit unicorn figure, and well ahead of its closest European rival, Germany, which has 42 unicorns.
“A new future skills fund will create a whole new industry and asset class, with the UK leading the way internationally” – Joel Gladwin, Coadec
In May, digital tech hiring reached its highest level for five years, with 132,000 tech vacancies recorded in a single week.
Coadec claims that a lack of financing options for post-18 training and lifelong learning means that growth could fall well short of its potential, with UK tech start-ups spending almost £4.5bn every year to backfill these roles.
Current plans for a lifelong loan entitlement, the equivalent of four years of post-18 education from 2025, are too distant for optimum effect, it adds.
“Now is the time for the government to take bold actions,” said Joel Gladwin, head of policy at Coadec. “A new future skills fund, based on future earnings agreements, will not only improve equality of opportunity for all, it will also create a whole new industry and asset class, with the UK leading the way internationally.
“We’ve seen this happen elsewhere, with forward-thinking approaches to fintech, peer-to-peer lending, and crowdfunding spurring on countless start-ups and making the UK a world leader. We now have a chance to do the same and be at the forefront of equipping people with the skills to thrive in the modern economy.”
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Giving funding on the basis of future earnings agreements, rather than educational background or prior attainment, offers multiple benefits, says Coadec:
- Increased social mobility, thanks to attracting people for whom training opportunities would otherwise seem unattainable
- Training providers only get paid if graduates secure good jobs, meaning that there is a built-in incentive for them to invest in after-graduation careers support and build strong partnerships with employers
- With 120% of the qualification value able to be disbursed again after three to five years, the government would essentially be providing the seed capital for an evergreen skills fund, with repayments constantly recycled to fund new candidates
The money for the proposal is already available, argues Coadec, in the form of a transfer from the government’s £2.5bn National Skills Fund.
For every one-off tranche of £100m invested, it adds, 10,000 qualifications would be provided over the next four years. Moreover, approximately £1.6bn of additional lifetime tax receipts, based on the higher earning potential of each candidate, would make for a 16x direct financial return on the original investment.