Megatrends 2025: The skills squeeze
What might drive transformative change over the next decade and how should your business prepare? Learn about the forces creating the skills squeeze, what your business can do to build resilience, and how we and our partners can help.
Building business resilience
Businesses who actively track and address the external trends shaping domestic and global markets are better equipped to thrive in the future. Businesses that anticipate emerging opportunities and potential disruptions are better placed to adapt, compete and lead.
As Scotland’s national economic development agency, we track the trends that are likely to shape Scotland’s economic future – addressing these via our three missions: accelerating the energy transition, boosting capital investment and scaling innovation.
Our latest Megatrends 2025 analysisopens in a new window identifies four transformative shifts that will shape Scotland’s economy over the next decade:
- The race for security
- The skills squeeze
- Environmental tipping points
- Breakthrough technologies
This article explores the second of these - the Skills Squeeze - and what it means for Scotland’s businesses, policymakers and economy. Drawing on global evidence and local insight, we highlight the risks, opportunities and actions needed to build a resilient, future-ready economy.
In the feedback we've had from Scottish companies, skills constraints are consistently highlighted as a key concern. Businesses in Scotland are facing a talent challenge: there’s a growing demand for new skills but a shrinking talent pool.
Not only does Scotland have an ageing workforce but it's also contract by 5.2% by 2050. In the meantime, there’s a growing demand for new skills, driven by new technologies and the green transition. How can businesses recruit and upskill their people at a time when competition for talent is growing and new technologies are set to transform the workplace?
This article describes what’s already changing and how these trends might impact on businesses over the next decade and beyond. It charts the links between global trends and the actions businesses can take today – with the support of Scottish Enterprise and partners.
The skills squeeze: five forces reshaping the future
1.Demographic change: a shrinking talent pool
Global fertility rates are falling below replacement levels. By 2050, countries like Japan, Germany, and South Korea will see dramatic declines in working-age populations. In Japan alone, the 15–64 age group is projected to shrink by 40%.
By 2030, one in six people globally will be over 60, creating a talent deficit across industries. Retirements are outpacing new workforce entrants, and even automation cannot fully offset the numerical shortfall. Korn Ferry estimatesopens in a new window that 85 million jobs could go unfilled by 2030 due to a lack of skilled talent.
This demographic pressure is driving up wages, intensifying competition for younger professionals, and creating a candidate-driven market where businesses must compete not just on salary, but on purpose, flexibility, and development opportunities.
The age profile of the world's population graph described in more detail
2. Job market transformation: technology and hybrid skillsets
The global labour market is undergoing seismic shifts. The World Economic Forum’s Future of Jobs Reportopens in a new window projects that 22% of current jobs will be disrupted by 2030, with 170 million new roles created and 92 million displaced.
Digital transformation is the primary driver. Skills in AI, big data, cybersecurity, and digital literacy are among the fastest-growing globally. Notably, 51% of AI-related job postingsopens in a new window now originate outside traditional IT roles, and generative AI roles in non-tech sectors have grown by 800% since 2022.
The future workforce must blend technical fluency with human-centric capabilitiesopens in a new window – resilience, adaptability, emotional intelligence, and creativity. Analytical thinking remains essential, but curiosity, collaboration, and lifelong learning are emerging as key differentiators.
The world's fastest growing jobs infographic described in more detail
3. Geopolitical and economic uncertainty: a fragmented talent landscape
Geopolitical tensions and economic instability are reshaping global talent flows. Anti-immigration sentimentopens in a new window and tighter border controls are limiting access to skilled labour, even as demand surges.
Meanwhile, fractured globalisationopens in a new window is driving a shift from integrated supply chains to regionalised production hubs. One-thirdopens in a new window of companies expect to transform their business models within five years due to geopolitical pressures.
This fragmentation is accelerating job transitions and elevating demand for roles in cybersecurity, risk management and leadership. Yet economic uncertainty is also discouraging workersopens in a new window from retraining or switching careers—especially if it involves short-term income loss.
4. Evolving worker expectations: purpose, flexibility, and growth
The pandemic catalysed a profound shift in employee expectations. Health, wellbeing, work-life balance and purpose now play central roles in career decisions—especially among Gen Z and Millennials.
According to Deloitte’s 2024 Gen Z and Millennial surveyopens in a new window:
- 89% of Gen Zs and 92% of Millennials say purpose is critical to job satisfaction.
- 45% of UK Millennials have declined job offers due to misalignment with personal values.
- Only 6% of Gen Zs view senior leadership as a primary career goal—preferring growth, balance and development.
There’s also an important disconnectopens in a new window at play here. While 71% of Gen Z believe employers should fund training, only 45% of employers agree. Businesses that align with evolving expectations—through purpose-driven culture, flexible policies and continuous development—will win the talent race.
5. Lagging education and training systems: falling behind market needs
Education systems are struggling to keep pace with technological change. Post-pandemic learning losses have widened foundational skill gapsopens in a new window, and vocational training is not meeting demand in high-growth sectors like AI, cybersecurity, and green technologies.
- Randstad reportsopens in a new window a 2000% increase in AI job postings, but only 13% of workers have received AI training.
- Accenture forecastsopens in a new window that 61% of workers will need retraining by 2027, yet only 5% of organisations are reskilling at scale.
- In the green economy, talent shortages threaten climate goals, with demand for sustainability roles far outpacing supply.
How might this impact businesses in Scotland?
Already, skills constraints are frequently highlighted by many Scottish businesses as their number one challenge. As these trends intensify, businesses will face growing competition for talent, rising costs and constraints on innovation and growth.
Demographic trends impacting labour supply:
- Scotland’s population is projected to growopens in a new window to 5.7 million by 2032 and 5.8 million by 2047, driven entirely by inward migration. Natural population growth is now negative.
- The population is ageing rapidlyopens in a new window. By 2047, the number of people aged 75+ will increase by over 340,000, while the number of children and young adults will decline by nearly 137,000.
- Although the working-age population will grow modestly until 2050, its share of the total population will fall by 5.2%, placing sustained pressure on labour supply, public services and productivity.
Labour market constraints:
- Economic participation is expected to decline, driven by early retirement and inactivity among older workers.
- Migration has been the sole driver of population growthopens in a new window since 2016, yet post-Brexit immigration rules—including higher salary thresholds for Skilled Worker Visas – are limiting access to international talent.
- Over one million older people have exited the UK workforceopens in a new window since the pandemic, and more than 20% of working-age adults are not in employment or actively seeking work.
Skills shortages and business impact:
- Consistently high numbers of Scottish businesses report skills shortages (Source: OU Skills Barometer, 70% in 2022, 71% in 2023, 56% in 2024). In 2025, 56% of Scottish businesses reported current skills shortagesopens in a new window, with 39% expecting the situation to worsen in the next five years.
- Consequences include increased pressure on existing staff (40%); reduced productivity (33%) and scaled-back growth plans (30%).
- Investment in trainingopens in a new window has declined, with average spend per employee falling from £2,111 in 2011 to £1,684 in 2022.
- Companies with advanced digital and AI capabilitiesopens in a new window are already outperforming peers by two to six times in shareholder returns.
- 24% of employers lack initiatives to engage underrepresented groups, limiting access to broader talent pools.
- Young people are motivated and digitally fluent, but many lack clear pathways into employment due to limited employer engagement.
Sectoral and skills alignment challenges:
- A persistent mismatchopens in a new window exists between the skills taught and those needed in high-growth sectors such as technology and energy.
- 31% of job vacancies are classified as skill-shortage roles, with technical, analytical, and digital skills in highest demand.
- Despite £2 billion invested annually in post-school education, digital skills gapsopens in a new window continue to constrain growth.
- Green jobs are expanding rapidlyopens in a new window, with advertised roles tripling since 2021, yet the talent pipeline remains underdeveloped.
- There is a growing 'experience gap' – where new recruits lack job-ready capabilities – which further compounds the challenge.
Economic consequences:
- The Scottish Fiscal Commission estimatesopens in a new window that labour market constraints could reduce income tax revenues by £839 million, underscoring the economic cost of inaction.
What steps can your business take?
Five actions to build a future-ready workforce
No matter the size or sector of your business, there's a range of practical actions you can take now to future-proof your strategy. We can support you in your journey.
1. Implement inclusive and forward-thinking employment strategies:
- Expand your talent pipeline beyond younger workers by actively engaging underrepresented groups, including individuals from disadvantaged backgrounds and experienced older worker
- Embrace workplace innovation to attract, retain, and empower a more diverse workforce - enhancing business resilience, agility, and overall performance.
- Find out how our workplace innovation support can help to drive profitability, productivity and innovation
- Read Skills Development Scotland’s guide to inclusive recruitmentopens in a new window
2. Drive productivity by investing in people alongside technology:
- Prioritise workforce development alongside technology and physical assets.
- Upskilling and reskilling enable employees to adapt to emerging technologies and market demands—boosting retention, engagement and agility.
- Read about five ways to boost workplace innovation
3. Align business values with employee expectations:
- Embed purpose, wellbeing and fairness into your culture not only attract top talent but also reduce employee disengagement and absence and enhance your reputation as an employer of choice.
- Find out how our Leadership Academy can help you develop your organisational culture, equip your people for tomorrow and motivate you for change.
4. Engage in cross-sector partnerships to help future-proof your workforce strategy:
- Collaborate with industry peers, education providers and government to shape responsive training solutions. These partnerships ensure access to the right skills at the right time—supporting innovation and sustainable growth.
5. Stay ahead of shifts in skills demand:
- Embed adaptability into workforce planning to ensure resilience and readiness for future opportunities
- Find out how we can help you to adapt your workplace to support change
Case studies and articles
- Why AI is more than a technological shift
- Hiring and retaining talent – advice from an HR industry leader
- Case study: learn how Guala Closures invested in leadership development
- Case study: find out how Highland Spring improved its organisational culture
- Case study: learn how Bell Ingram introduced new workplace practices
- Business purpose and productivity - Anna Clover and Bridgette Wesselsopens in a new window
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