By investing in skills, small businesses can stay competitive, adapt quickly and be more productive, while at the same time attracting and retaining staff.
Yet small firms often find it difficult to recruit employees with the right qualifications, abilities and experience to fill vacancies, and struggle to keep their own skills and those of their staff up to date.
Current high employment costs, with rises in employers National Insurance Contributions and National Living Wage, are also presenting a challenge. Our rolling Small Business Index survey highlights labour costs as one of the biggest cost drivers for small businesses. And when labour costs increase, it can lead to businesses spending less on training.
To help unlock greater investment in skills by small business owners, government needs to get better at providing incentives for them.
Apprenticeships, for example, are a great way of bringing new skills into a business, yet starts at SMEs have decreased by almost 50% since 2017.
One of FSB’s key asks is to re-introduce the £3,000 incentive for those hiring an apprentice under 25 years old, exclusively for SMEs. Our research shows that almost three quarters of small firms that currently employ an apprentice say they would take on more in the future, if the £3,000 incentive made a comeback.
Our members also tell us that the system is confusing, fragmented and is very admin-heavy, with a third of small employers who currently have an apprentice on their books telling us reduced admin or paperwork would encourage them to take on more.
Aside from apprenticeships, we’d like to see other interventions rolled out to upskill the existing labour market. A good place to start is providing vouchers to small business employers allowing them to buy external support to develop a training plan or a workforce development strategy, mapping out how they can upskill their employees.
For the self-employed, legislation should be introduced that widens the circumstances in which training costs are tax-deductible to encourage more people to start or grow their business. last year helpfully clarified its guidance to give greater confidence within the existing law, but now a proper legislative change is needed.
It’s great to see Learning and Work Institute’s Get the Nation Learning campaign highlighting the benefits that come from lifelong learning and keeping skills up to date. Fostering an environment where skills development is prioritised would bring investment and growth. We know that small businesses are likely to employ people furthest from the labour market and so enabling them to invest in skills is incredibly important to the economy as a whole and to help meet the Government’s 80% employment target.
With more than 5.7 million across the UK, small firms can be integral to fixing the skills gap – if the investment is there.
Tina McKenzie, Policy Chair at the Federation of Small Businesses (FSB)