UK economy suffering from small business skills shortage

The UK economy is losing out on £18 billion due to 520,000 job vacancies that small companies are unable to fill due to a lack of relevant skills, research finds.

Small business owners spend more than 100 hours a year on average looking for suitable candidates, training new members of staff and developing and supporting their existing staff, according to a study by online lender Everline and the Centre for Economic and Business Research.

This figure represents time that could be spent further developing the business if suitably skilled staff were readily available, and equates to £3,160 of their time in economic terms (Gross Value Added).

The number rises to £7,540 for 18-34 year olds and falls to £1,860 for respondents aged 55 and over, indicating that younger entrepreneurs recognise that in order to focus on business development themselves, they need to spend more time creating a skilled workforce.

The small business employment index (based on changes in headcount and the number of vacancies in a company) is at its highest since 2004 and just under a quarter (24 per cent) of small businesses surveyed had available vacancies today.

However, a further 16 per cent were unable to fill a role in the last month due to unskilled candidates. In addition, only 17 per cent say that the staff in their business are fully trained in every area of their job role and only 47 per cent are comfortable relying on less senior members of staff to take on more senior roles in the business if necessary.

This figure rises to 58 per cent for 18-34 year olds but falls to just 43 per cent for respondents aged 55 and over.

The small business employment index also finds that small firms are planning to increase their hiring over the next quarter and into 2015, therefore highlighting the need for the skills shortage to be addressed to meet the rise in vacancies.

Russell Gould, managing director at Everline says that the study illustrates that small business owners are often spending too much time searching for suitable candidates when they could be focusing on growing their business.

‘We are in the midst of a transformational story where SMEs learn to take advantage of the digital age, and more needs to be done to ensure that our workforce has the necessary skills to excel in this changing environment.

Younger entrepreneurs are doing the right thing by dedicating the time up front to upskill their staff, but a more skilled workforce would remove the necessity for this and consequently free up even more time for UK small business owners.’

Ian Brinkley, chief economist at The Work Foundation adds that, in order to support small business growth, more needs to be done to incentivise these businesses to pool their resources more.

‘As individual companies with few staff, the cost of things like training, upskilling and recruitment can be significant. By encouraging clusters of small businesses to share the cost by organising larger training sessions with nearby companies, we could significantly reduce their overheads.

‘In addition, large firms should do more to provide mentorship and experience through their supply chains. Properly evaluated public supported mentoring schemes for SMEs can also be very helpful. For a small business, getting your recruitment wrong can be fatal.’

Further reading on skills

Ben Lobel

Delphine Hintz

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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