Digital Skills shortage could cost the UK economy up to £27.6 billion and more than 380,000 jobs by 2030.
As the UK races towards a digital-first economy, the consequences of persistent digital skills shortages are becoming increasingly apparent. Projections indicate that without intervention, these shortages could cost the UK economy up to £27.6 billion by 2030, coupled with significant job losses and reduced productivity.
The analysis in this blog comes from a recent on digital skills and the potential economic impact of digital skills shortages authored by Dr Huanjia Ma, Dr Konstantinos Kollydas, Dr Matthew Lyons, and Professor Anne Green.
The digital economy and the skills shortages impacting it; What regions will be most affected?
No region is immune to the economic costs of the digital skills shortage. London and the South East are forecast to be hit hardest in absolute terms due to their predominant role in the digital economy. However, given the large size of the economy in these regions, the region is less impacted in percentage terms (see Figure 1).
When considering the percentage impacts, regions such as the North West, Yorkshire and the Humber, and the East of England are also projected to incur significant economic costs. These regions may not have the highest levels of demand for digital skills, yet they are poised to bear significant economic impacts relative to the size of their economies.
Figure 1. The cost of the digital skills shortage in employment and economic output % terms across ITL-1 regions
Source: SEIM-UK
When considering the impact over time we can see that in 2024 the South East was the region most impacted (-1.44%) and the West Midlands the least impacted (-0.08%) by the digital skills shortage as a percentage of employment.
By 2030, the picture is forecast to look different with all regions average seeing more employment impacted with the average employment impact in 2024 of -0.95% falling to -1.39% in 2030.
We also observe some reordering with the West Midlands and London regions insulated in 2024 hit much harder in 2030.
Figure 2: Impact of Digital skills shortages on employment (%) by region 2024 and 2030
The digital skills shortage doesn’t just hit high tech sectors.
The digital skills shortage is not contained to high-tech clusters but affects all regions across the UK and employment in high and low tech occupations.
For example, low-tech industries, such as food manufacturing and retail, are forecast to be hit hardest suffering losses of up to £14 billion by 2030 due to their inability to integrate digital technologies. High-tech sectors appear more resilient, though they are also constrained by shortages, limiting their potential for innovation and growth.
Table 1: Impact of Digital Skills Bottlenecks on Output by Types of Sectors – UK, 2024-2030 (Million £)
| Sector Type | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 |
| Other | -422 (-0.11%) |
-1341 (-0.33%) |
-2542 (-0.63%) |
-2728 (-0.68%) |
-2742 (-0.68%) |
-2145 (-0.54%) |
-2779 (-0.69%) |
| Low-Tech | -2246 (-0.16%) |
-7114 (-0.51%) |
-13286 (-0.95%) |
-14142 (-1.01%) |
-14267 (-1.02%) |
-11185 (-0.80%) |
-14365 (-1.03%) |
| Medium-Tech | -402 (-0.08%) |
-1199 (-0.23%) |
-2164 (-0.42%) |
-2198 (-0.43%) |
-2327 (-0.46%) |
-1825 (-0.36%) |
-2313 (-0.45%) |
| High-Tech/Knowledge Intensive | -1323 (-0.08%) |
-4066 (-0.26%) |
-7520 (-0.48%) |
-7939 (-0.51%) |
-8086 (-0.52%) |
-6360 (-0.41%) |
-8143 (-0.52%) |
Source: SEIM-UK
Occupations across the economy are at risk
Professional roles, which rely heavily on advanced digital skills, are the most affected, with projected FTE losses of over 69,000 by 2030. Even elementary occupations, which are increasingly reliant on basic digital skills, face significant constraints, with employment losses of up to 48,000 FTE jobs.
Key Policy Lessons
Addressing digital skills shortages requires coordinated efforts across education, industry, and government. Key recommendations include:
- Expanding access to advanced digital skills training, particularly in regions with acute shortages.
- Shortages in high-demand regions, such as London and the South East, should be addressed to prevent ripple effects that exacerbate challenges elsewhere. Strengthening interregional collaboration and resource-sharing initiatives can distribute digital talent and expertise more equitably, enhancing the overall resilience of the UK economy.
Notes on the methodology
To model the impact of digital skills shortages on the UK economy, the newly updated Socio-Economic Impact Model for the UK (SEIM-UK), a macroeconomic Multi-Regional Input-Output (MRIO) model, is employed to project the potential economic costs associated with these shortages and to estimate the benefits that could be realised by addressing them. The novel development in the SEIM-UK model links labour demand and labour supply, incorporating constraints in labour supply to account for labour mobility across regions and occupations. This allows the model to track bottlenecks in labour supply given increases in demand, as well as the associated economic impacts.
To model the increased impact of digital skills supply shortages on the economy, we assumed that the demand in digital skills jobs, in the form of Full-Time Equivalent (FTE), grows at rate equals to the average growth rate between 2012 to 2022, from 2024 to 2030, while on the other hand, there is no substantial supply in workforce equipped with the right digital skills.
This blog was written by Huanjia Ma, Research Fellow, Dr Matt Lyons, Research Fellow, Kostas Kollydas, Research Fellow, Anne Green, Professor of Regional Economic Development and Co-Director, at City-REDI, University of Birmingham.
Disclaimer:
The views expressed in this analysis post are those of the author and not necessarily those of City-REDI or the University of Birmingham.