SMEs: is enough being done to tackle the UK’s skills shortage?

Improving economic conditions have encouraged confidence among the UK’s small firms to “hit an all-time high”, according to the Federation of Small Businesses (FSB). However many sectors are facing a “growing skills shortage” which is a “significant barrier to growth”.

The FSB’s latest Small Business Index (“a quarterly macro-economic report analysing the trends of small businesses in the UK”) found almost a third reported that skills shortages were hampering their growth ambitions.

Remedial measures

The skills shortage problem is not unique to the UK. FSB national chairman, John Allan, says: “Many businesses across Europe are struggling to fill vacancies with appropriately trained staff. The problem can’t be addressed until the education system does a better job of preparing young people for the world of work.”

The FSB wants the business and education community to collaborate more closely together to ensure young people are ready for work. It adds: “Employability skills must be embedded from an early age; the labour market has changed dramatically in recent years and businesses are adapting, but the education system needs to catch up.”

The organisation is calling for a “business-led, high-quality apprenticeship system that provides a real choice between vocational and academic routes. This should be for the long term and aspire to match standards of leading competitors, such as Germany.”

It also wants traineeships to be a “credible alternative” to formal apprenticeships. It believes initiatives such as The City & Guilds TechBac® (a new curriculum developed and endorsed by industry to enable young people to develop skills to become “work ready”), 14–19 college programmes and the rejuvenation of university technical colleges show that vocational education is no longer considered the second tier of the UK education system.

Capital shortfall

The FSB’s research tallies with the latest CBI/KPMG London Business Survey, which suggests that although optimism continues to rise, with businesses remaining positive about their recruitment and expansion plans (62% planned to take on staff in the second half of 2014), skill shortages continue to be a key concern.

Almost half (45%) of respondents reported skill shortages among current employees, with 66% experiencing difficulties recruiting sufficiently skilled people.

“London’s businesses are clear that core literacy and numeracy and general employability skills must be prioritised,” says Lucy Haynes, CBI London director. “There’s also strong demand for people with science, technology, engineering and maths skills, given that London’s thriving creative and technology sector is set to be a big growth contributor over the next five years. Having the right skills to drive the capital’s economy forward is core to its continued success.”

According to the CBI, it’s a nationwide problem. Haynes continues: “Our national surveys suggest that a growing number of businesses elsewhere in the UK are worried there won’t be enough sufficiently skilled workers to meet rising demand as the economic recovery continues to gather pace.”

Recruitment difficulties

The FSB’s research identified construction as a sector particularly badly affected by the UK skills shortage and this is backed up by research carried out by the building industry trade association, the Federation of Master Builders (FMB).

“Our members’ experiences support the view that the UK construction industry is facing significant skills shortages,” says FMB chief executive, Brian Berry. “Our most recent State of Trade Survey found that firms were having the greatest difficulties in recruiting bricklayers, but plasterers, site managers and supervisors are also in short supply. There’s a general under-supply of new talent and finding younger tradesmen or apprentices of the right calibre and skills level is difficult. Multi-skilled tradesmen are in particularly short supply. Many building firms view this as their biggest barrier to growth.”

As Berry explains, in the past six years the UK construction industry has faced the deepest “economic downturn” in living memory. “Large numbers of workers were laid off – or chose to leave the industry. Some 200,000 people under the age of 20 left the sector in 2008 alone and the construction industry has an aging workforce – with many skilled workers also being lost to retirement.” As Berry adds, many firms battling to survive simply haven’t been able to afford to invest in training.

Apprenticeship reforms

Berry would like to see many more construction industry apprentices. “But to achieve that we need to make it as easy as possible for small and micro-firms [those with fewer than 10 staff] to take them on. Micro-firms employ two thirds of all construction industry apprentices, but training young people involves risks and costs, which can be difficult to sustain for many small firms.

“Recent government proposals to reform apprenticeship funding aim to give employers more control over funding, but they’ll impose greater upfront costs and admin that smaller firms will find extremely off-putting. If implemented, they could lead to a catastrophic cut in the number of apprentices being taken on at a time when we need to see a marked increase.”

Berry believes that industry also needs to make a more concerted effort to engage with schools and colleges to highlight the opportunities this industry offers young people. “We must challenge popular misconceptions and provide a more accurate picture of the modern and diverse industry we’re becoming,” he argues. “Government and industry must continue to work together to improve the status of construction apprenticeships as a viable and valued alternative to A-Levels and university.”

No quick fix

Chris Kane is director of Dorset-based building firm Greendale Construction, which he co-founded in 1990. It now has almost 50 direct employees, but finding additional tradespeople nearby has been a challenge, he admits. “We’ll always find the people we need, so we haven’t lost work because of it, but when necessary we’ve had to bring in people from other parts of the country where trade is still slow and skilled people are looking for work,” he explains.

“The recession has caused a big skills exodus, but it happens in construction, it’s a cycle – things suddenly fall off a cliff. Skilled people are laid off or chose to do something else, and firms who are struggling to survive can’t afford to train people. The other problem we’ve had is investing a lot money in training people only to see them leave for slightly more money down the road, which is extremely frustrating.”

Kane says he thinks the government is doing all it can when it comes to apprenticeships but, he adds: “I’d like to see more done to lessen the cost of training, to make it easier for small firms. The skills shortage is the biggest challenge facing my industry, and there won’t be a quick fix.”

This content has been sponsored by E.ON, whose brand it displays. All content is editorially independent.

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