Skills shortages, legal changes, rising employment costs and recruitment challenges are forcing organisations to rethink how they build capability. Upskilling existing employees gives you a practical way to close skills gaps, retain valuable people and reduce reliance on an increasingly difficult hiring market.
The case for developing your existing workforce is becoming stronger. CIPD’s Resourcing and Talent Planning Report 2026 shows 48% of employers increased efforts to develop talent in-house over the past year, with upskilling among the most common responses to recruitment difficulties and tighter migration rules.
For boards and senior leaders, this makes workforce development a business decision, not simply an HR initiative.
Attracting Suitable Candidates is Becoming More Difficult
Competition for particular skills and experience remains high despite low vacancy levels in the UK labour market. Factors like reduced net migration and shifting skills requirements driven by rapid advances in technology and AI have left organisations fighting for a small pool of well-qualified talent.
UK immigration rules have tightened since 2024, reducing the availability of skilled labour in the market. These changes have affected how organisations source workers, with many reducing recruitment or dealing with higher costs to acquire migrant labour.
According to CIPD research, 52% of organisations faced greater competition for well-qualified talent over the past year, and 44% had difficulty retaining talent. More than half of organisations reported difficulty attracting candidates, particularly for senior and skilled roles. Even attracting low-skilled candidates is becoming a challenge for some, with 18% of organisations reporting difficulties.
At the same time, 58% saw an increase in unsuitable applications, compared with only 33% reporting more suitable candidates. You may have more people applying for a role but still find it an uphill task to access candidates with the capabilities your business actually needs.
While hiring remains the right answer for some organisations, it shouldn’t automatically be your first answer.
Recruitment and Employment Costs are Changing the Hiring Equation
Cost is another reason to look internally before adding to headcount. Data from the CIPD shows that recruitment costs have increased since 2024, with the median cost of recruiting senior managers reaching £3,500 while that of other employees is at £2,000.
In addition, changes from new measures introduced through the Employment Rights Act 2025 are also expected to increase employment costs, with an estimated direct cost to business of £1 billion per year once the Act is fully implemented. Research shows that 54% of employers believe the measures will increase employment costs, with 14% expecting a large increase and 40% expecting some increase. A further 26% expect to recruit fewer workers because of anticipated employment costs.
The National Living Wage has also risen to £12.71 an hour for workers aged 21 and over from April 2026. You also need to consider the legal changes that are still taking effect. From January 2027, the qualifying period for ordinary unfair dismissal protection will reduce from two years to six months.
While none of these mean you should stop hiring, it makes it crucial to have a clearer business case for every additional hire. Developing someone who already understands your customers, systems and culture can sometimes be a more practical route to the capability you need.
Your Existing Workforce May Hold More Capability Than You Think
Upskilling starts with understanding what you already have. You may have employees who could take on more responsibility with targeted development, technical specialists who could move into management, or people with transferable skills who only need training in a new area rather than a completely new career.
The challenge is finding those people before you decide the capability gap can only be solved through recruitment. According to Skills England’s Annual Skills Report 2026, significant reskilling of the existing workforce is needed because the demand for key occupations is expected to increase by nearly a quarter over the next decade, and the education pipeline alone won’t meet employer demand.
This means you can’t rely on the external talent market to produce every skill you’ll need.
Ensure You Upskill According to the Business Plan
More training isn’t automatically better. If you invest in courses without connecting them to your future workforce needs, you may create activity without building useful capability.
Start by determining what your business requires to meet its goals. What skills will you need to deliver your growth plans? Which roles are becoming harder to fill? Where could technology change the work? Which capabilities will become more valuable over the next two or three years?
Focus on providing your employees with training that is relevant, current and responsive to changing needs. You can also incorporate apprenticeships to build skills faster, especially in areas like AI, digital, construction and engineering.
Boards Need a Clearer View of Future Capability
Upskilling shouldn’t sit solely with HR. Your board should understand where critical skills sit today, where gaps are emerging and whether the organisation has a realistic plan to close them.
The CIPD notes that only 16% of organisations plan more than two years ahead for workforce needs, with almost half, or 46%, still taking an ad hoc approach to recruitment. That creates a risk because if you wait until a specialist leaves or a recruitment campaign fails, your options become narrower and more expensive.
A stronger approach starts earlier, and it requires you to map the capabilities the strategy requires, assess the workforce you already have and identify where recruitment, development or external expertise makes most sense.
Novo’s Perspective
The UK’s changing labour market has become challenging to navigate, and it requires you to become more deliberate about where new capability comes from. Upskilling allows you to develop skills within the organisation, strengthen retention and reduce reliance on an increasingly difficult external market.
At Novo Executive, we believe the organisations that are best positioned for the future are those with a clear view of the skills they have today and the capability they’ll need next. This requires boards to move workforce planning beyond headcount to building the skills the strategy will depend on.
