§ Mr. Bellingham
To ask the Secretary of State for Trade and Industry what estimate her Department has made of the annual cost to British businesses, in terms of extra training and lost productivity, of basic skills shortages in the workforce. 
§ Mr. Ivan Lewis
I have been asked to reply.
There is robust evidence that poor literacy and numeracy skills have adverse effects an the earnings and employment prospects of individuals.
However there is limited evidence on the cost to British businesses of basic skill shortages in the workforce.768W
One 1992 study that attempted to quantify the costs to employers of poor basic skills suggested that they were costing companies employing over 50 workers an average of £ 165,000 a year and for the largest companies (with over 1,000 employees) the costs could be as high as £500,000 per year (equivalent to £208,000 and £626,000 in 2002 prices).
Based on this evidence, the total cost to UK businesses (employing over 50 workers) of poor basic skill levels was estimated to be in the region of £4.8 billion pounds per annum (£6 billion in 2002 prices).
These costs are likely to be underestimated, as they do not account for costs associated with lost future business, the need for additional training because staff may be unable to cope with written material, the cost of work that needs to be re-done or the costs incurred by firms with 50 or fewer employees.
The influential report "Improving Literacy and Numeracy: A Fresh Start" by Sir Claus Moser highlighted further analysis based on this 1992 research study. It suggested that the impact of poor basic skills on the UK economy as a whole could be as high as £10 billion per annum (in 1999 prices).