Nearly one in three defence firms cannot find graduates to hire, even as youth unemployment sits at an 11-year high, a new report has found.
Research by the University of Manchester and CBI Economics highlights a growing skills shortage among young people that is hampering recruitment efforts across the defence sector.
The report examined universities’ impact on business and found that nearly three quarters of defence firms already maintain links with universities, yet many continue to suffer from a significant skills gap.
A survey of around 460 businesses found that approximately one in five said graduates lacked the skills required to meet employer expectations across industries.
The problem is most acute in defence, where 31 per cent of firms reported experiencing a skills shortage, compared to 27 per cent for clean energy industries and 25 per cent for financial services employers.
Most firms identified sector-specific technical skills and subject knowledge in science, technology, engineering and mathematics as the primary areas of concern when assessing graduate candidates.
Firms also said there was a “quantity issue” with the number of skilled graduates available to hire, suggesting the challenge is not purely about quality but also about pipeline volume.
The findings arrive as the government is scrambling to find ways to fund an uplift in defence spending, with officials debating when the UK could spend three per cent of GDP on the armed forces and security.
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 added: “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 also blamed the costs of administrative processes for research and development tax reliefs, with respondents citing issues with “how certain costs are classified” as a barrier to university collaboration.
Some tax relief schemes were merged under the previous Conservative government to prevent abuse, while overseas subcontracting restrictions have further complicated partnerships between firms and academic institutions.
The recent Alan Milburn report suggested that around one in seven young people classified as not in education, employment or training held a university degree, pointing to a troubling mismatch between qualifications and outcomes.
Milburn said the government should focus on improving employment outcomes for graduates rather than on the quality of qualifications gained, with full recommendations expected later this year.
At last year’s Labour Party conference, Sir Keir Starmer announced the government would drop a target to get 50 per cent of school-leavers into university, signalling a broader shift in education and employment policy.
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, redirecting ambition towards tangible employment prospects.