Closing Europe's Skills Gap: Sector-Specific Lessons for EU Skills Policy

This policy brief is part of D2.3 (policy brief series) in the Horizon Europe project "Global Strategy for Skills, Migration and Development" (GS4S). Skill shortages represent one of the most pressing structural challenges facing European businesses, with nearly half of both small-to-medium-sized enterprises (SMEs) and multinational enterprises (MNEs) reporting high or very high shortages, particularly in healthcare, ICT, and manufacturing and construction. Demographic pressures and the demands of digital and green transitions show no sign of abating. Drawing on a large-scale survey of 4,409 businesses across four countries, this brief examines how firms respond to skill shortages and under what conditions those responses succeed. The central finding is that effective responses are combinations of strategies, not single interventions, and their value depends on firm size, sector, and regulatory context. SMEs rely predominantly on training and local labour market strategies, whereas MNEs make greater use of migration-related instruments. Sectoral analysis reveals distinct winning configurations: automation paired with talent inflow programmes in IT and manufacturing; outsourcing alongside automation in healthcare; and outsourcing as the dominant lever in construction. Key recommendations include bundling automation and talent inflow support, regulating outsourcing arrangements in health and construction, targeting skill inflow initiatives more precisely, and treating workforce training as productivity policy, particularly for SMEs, for whom it remains the most widely used response. Realising Europe's competitiveness ambitions will ultimately require policy mixes that reflect the genuine diversity of firms navigating an increasingly constrained labour market.