Workforce skills gaps are costing Saudi Arabian businesses potential profits and limiting their ability to compete. A World Bank study found that 61% of private-sector establishments have lost potential profits due to gaps in employee capabilities.
- Saudi Arabia’s private sector faces growing skills challenges
- Retail and construction shape Saudi Arabia’s workforce skills demand
- Saudi SMEs report fewer skills shortages than European businesses
- World Bank recommends aligning education with labour market needs
- Workforce development remains central to Saudi Arabia’s economic diversification
The findings highlight a growing challenge for employers as Saudi Arabia pursues economic diversification and higher productivity. Businesses are not only struggling to find suitably skilled workers. They are also losing commercial opportunities and facing barriers to adopting new technologies.
The report, titled Upskilling: Required Skills and Workforce Development in Saudi Arabia, found that 55% of establishments had lost business opportunities because of skills shortages.
Meanwhile, 48% reported difficulties introducing new technologies or products. Another 48.5% said skills gaps had affected the quality of their products and services.
These findings suggest that workforce development has become a business performance issue, rather than just a recruitment concern.
Saudi Arabia’s private sector faces growing skills challenges
The World Bank study draws on a survey of 3,016 private-sector establishments across Saudi Arabia’s 13 regions. The research was conducted between May and October 2024.
The World Bank prepared the report at the request of Saudi Arabia’s Ministry of Human Resources and Social Development.
It found that a similar proportion of businesses struggled to find employees with the skills needed for at least one operational activity.
However, the impact extends beyond hiring difficulties. Companies face challenges when existing employees lack the capabilities to support business operations, technology adoption and service delivery.
As a result, skills shortages can affect both immediate business performance and longer-term competitiveness.
Retail and construction shape Saudi Arabia’s workforce skills demand
The structure of Saudi Arabia’s private sector also influences its demand for skills.
Retail, hospitality and food services account for 43% of the workforce covered by the survey. Construction represents another 19.7%.
According to the World Bank, this concentration in sectors that rely less on advanced skills could reduce incentives for businesses to invest in employee training and modern technologies.
This creates a wider challenge for the Kingdom’s workforce development efforts.
Expanding training programmes alone may not address the problem. Businesses must also move towards higher-productivity activities that require more advanced capabilities.
The report identifies several skills that can support this transition. These include critical thinking, complex problem-solving, digital literacy and adaptability.
Social and behavioural capabilities also remain important. Together, these skills can help employees respond to changing business requirements and contribute to productivity improvements.
Saudi SMEs report fewer skills shortages than European businesses
The World Bank also compared skills shortages among Saudi businesses with those in international markets.
Around 35% of small and medium-sized enterprises (SMEs) in Saudi Arabia reported difficulties finding workers with the required skills.
In comparison, the average stood at 80% among businesses in European Union countries.
However, the World Bank cautioned against treating this difference as evidence that Saudi Arabia has a stronger supply of skilled workers.
The comparison may reflect differences in economic structures, job complexity and demand for advanced capabilities. Survey methods may also influence the results.
Therefore, recruitment difficulties alone do not provide a complete picture of a country’s skills gap.
The types of jobs businesses create and the capabilities those roles require also matter.
World Bank recommends aligning education with labour market needs
To address the challenge, the World Bank has called for closer alignment between education, training and labour market requirements.
Its recommendations include strengthening skills-based recruitment and assessment. It also calls on businesses to adopt modern technologies and improve management practices.
Another priority is redesigning job roles to make better use of available talent.
For employers, this means looking beyond training programmes as a standalone solution. Employees need opportunities to apply their skills in their daily work.
Businesses must also create management systems and working environments that support the effective use of newly acquired capabilities.
The report highlights the need to develop cognitive, social, behavioural and technical skills as technology and economic requirements change.
Workforce development remains central to Saudi Arabia’s economic diversification
The findings underline the connection between workforce capabilities and private-sector performance.
While employers may invest in recruitment and training, those efforts must translate into better productivity, stronger service quality and improved business outcomes.
Moreover, businesses need to create roles that make effective use of employee capabilities.
For Saudi Arabia, this challenge extends beyond filling vacancies. The Kingdom’s economic diversification plans also depend on businesses adopting new technologies and moving towards more knowledge-driven activities.
Closing the skills gap will therefore require coordinated efforts across education, workforce development and business transformation.
As the private sector expands into higher-value activities, employers’ ability to attract, develop and deploy skilled talent will remain an important factor in Saudi Arabia’s competitiveness.
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