Skill gaps are a widespread problem across the countries surveyed, with more than one in three firms reporting a mismatch between the skills they need and those their employees possess. The highest share of enterprises reporting skill gaps is in the Slovak Republic (54%), followed by Italy (37%), Portugal (32%), the Netherlands (31%) and Hungary (27%). These differences across countries reflect both different economic conditions, as well as the unique challenges each country faces in adapting to technological change and evolving workforce demands.

Across countries, skill gaps are most frequently identified in technical skills (46% of firms facing skill gaps), problem-solving skills (34%) and teamworking skills (33%). They are least frequently identified in reading (2%) and mathematics (4%). However, there are some notable differences between countries. For instance, firms in the Slovak Republic and the Netherlands rank customer handling skills as one of the top three gaps, while firms in the Netherlands also frequently highlight management skills as a key skill gap.

Skill gaps typically pertain to only a small share of employees. While many firms report skill gaps, only a small proportion (<5%) say that most of their workforce lacks the necessary skills. This suggests that skill gaps are more likely to affect specific groups of employees rather than being a firm-wide problem and suggests they could be addressed through targeted interventions. A significant share of firms is uncertain whether they face skill gaps. The highest share of firms reporting that they do not know if they have skill gaps is in the Netherlands (18%) and Hungary (15%). This suggests a lack of robust skills assessment mechanisms.

Larger firms are more likely to report skill gaps than smaller ones (59% versus 34% on average across countries). This may be due to greater organisational complexity and decentralised decision-making, but also to the fact that larger firms are more likely to have formal skills assessment processes and hence a greater awareness of gaps. Smaller firms, on the other hand, may under-report skill gaps due to limited capacity for regular skills assessment. This highlights the importance of improving skill needs assessment within firms, particularly for smaller firms that may not have formal HR functions. Larger firms, particularly in the services sector, are more likely to report gaps in IT and management skills, while smaller firms are more likely to have problems with customer service and problem-solving skills.

Skill gaps are most common in manufacturing, where 41% of firms report gaps on average (compared to 32% in the communications and finance sector), reflecting both the rapid pace of technological change and the sector’s heavy reliance on specific technical skills. Sectors with the lowest shares of firms with skill gaps vary between countries and are communications and financial services in Hungary (20%), the Netherlands (25%) and the Slovak Republic (45%), construction in Italy (32%), and real estate, business services and arts in Portugal (25%). There are notable differences in the types of skills employers seem to be lacking between sectors: firms in communications and financial services report gaps in IT and management skills, while those in manufacturing and construction face shortages mainly in technical skills.

Skill gaps reportedly result in a range of negative consequences for firms. The most reported consequence is an increased workload for existing staff (63% of firms reporting skill gaps). This is followed by: increased operating costs (50%) and difficulties in implementing new working practices (46%). One in three firms say that skill gaps limit their ability to adopt new technologies. This highlights the significant economic risks posed by skill gaps and reinforces the need for firms to address these challenges.

Recognising skill gaps is essential to addressing them. Firms with skill gaps are more likely to be those that proactively assess their skill needs (73% versus 63% for firms with no gap, on average across countries). The difference between firms with and without gaps is particularly high in the Netherlands the Slovak Republic (21 and 12 percentage points respectively). In contrast, firms that are unaware of whether they have skill gaps are often those that do not regularly assess their skill needs (45%). The share is as low as 15% in Hungary. This finding underscores the need for policies that support firms – particularly small and medium sized enterprises – in developing robust skills assessment practices.

Training and development of existing staff is the most common strategy used by firms to address skill gaps. Nine out of ten enterprises facing skill gaps use this approach. Fewer enterprises rely on recruitment (49% on average across countries) and changes in working practices (39%). Only a small proportion of enterprises address skill gaps by outsourcing or discontinuing activities (5%), with small enterprises in the Slovak Republic most likely to do so (10%). Larger firms are generally more likely to rely on training as a solution, while smaller firms are more likely to adapt working practices, such as redistributing tasks between employees. Sectoral differences are modest, but firms in the service sectors are more likely to invest in training than those in manufacturing.

Recruitment is another key strategy used by companies to address skill gaps, particularly when they need to acquire specific skills quickly to meet immediate operational needs. However, many companies find it difficult to recruit for the skills they lack internally, particularly in tight labour markets. There is a strong overlap between the skill areas for which employers report gaps in their workforce and the skill areas for which they find it difficult to recruit externally. This suggests that relying on recruitment alone cannot be a sufficient strategy in a competitive labour market where certain technical and professional skills are in short supply.

Firms with skill gaps are less likely to adopt modern working practices such as teamwork, regular meetings to improve work processes and the maintenance of databases of best practice. For example, data from Portugal show that firms with skill gaps have a lower proportion of employees working in teams (46% vs. 48% for firms with no gap), are less likely to hold meetings to improve working practices than firms without skill gaps (25% vs. 27%) and less likely to update databases of good practices (23% vs. 31%). This suggests that skill gaps not only hinder operational efficiency but may also limit a firm’s ability to foster collaboration and innovation.