Mind the skills gap


SMEs recognise that the UK economy is suffering from a prolonged skills shortage. The CBI recently warned that this is a barrier to recovery, with 2 in 3 businesses saying they expect their need for staff with higher level skills to grow in the years ahead.

The skills gap is seen as one of the main reasons for the UK’s productivity woes, particularly affecting sectors like engineering and construction. The Institution of Engineering and Technology (IET) found that over half of companies said that a shortage of skills poses a future threat to their businesses, while the Federation of Master Builders said a similar proportion of construction SMEs are struggling to recruit bricklayers, carpenters, joiners and supervisors.

As these gloomy studies indicate, there is a clear need for a skilled workforce. However the question that we really need to address is: how do we convert an abundance of low skilled, inexpensive labour into a highly skilled, productive workforce? Hiring low-skilled staff in droves, while reducing investment in training, technology and equipment, clearly lowers our productivity levels. The UK is woefully behind all of its developed nation counterparts on this key metric. According to The Economist, “a British employee produces a fifth less than a French one, but he or she is more than a third cheaper to hire.” British employers are choosing to hire more people, who are less skilled and less productive than workforces in other European nations.

Thankfully, small business owners and decision-makers appear to be taking a different approach by focusing on training and upskilling existing staff and turning away slightly from hiring. Our Quarter 2 2015 SME Confidence Tracker showed a steady increase in the number of SME employers investing in their staff, quarter on quarter. This is a positive development, but even small business owners could do more. Around a third are not investing in anything at all, suggesting that they are more uncertain about the economic environment than general business confidence trackers indicate.

Small businesses have a clear role to play in arming future generations with the skills they need to succeed as individuals and to contribute to the wider economy.  Government has a role, albeit perhaps not as significant as one might imagine. Government  initiatives can focus too much on one solution. The Government’s appetite for apprenticeships has been well-intentioned and largely benefitted SMEs. There is talk of an apprenticeship levy for large companies, which could have unintended consequences for the little guys. If large companies shun apprentices due to cost, that could bring the whole Government-backed scheme down. I agree with the CBI that the apprenticeship levy should not be used to subsidise apprenticeships for small businesses.

Apprenticeships in and of themselves will not solve the skills gap – we should look to tailor strategy and tactics to specific industries and sizes of business, because what works for a large corporate may not work for a sole trader. In the absence of a specific policy answer to this problem, SME owners must do more to increase the appeal of working for them. Working for a small business clearly has unique benefits: employees have a bigger voice in the direction of the business, more exposure to a variety of different business areas and a direct line to the Founder and CEO.  Young people are struggling to find work, with the latest unemployment figures at 15.9% for 16-24 year olds. It’s time for UK small businesses to really sell the unique aspects of working for an SME to the youth of today, if we are to tackle today’s skills gap – and tomorrow’s.

Next Government must recognise the full range of financing options for UK SMEs


The lead-up to the General Election on 7 May has had an unprecedented focus on small businesses, with all parties outlining policies designed to support their growth. The parties appear determined to help ‘working Britain,’ particularly the small business owner. But the political parties’ manifestos indicate a worrying ignorance of how SMEs seek financing. They imply that UK SMEs are faced with a simple dichotomy: the big banks on the one hand and emerging peer-to-peer lenders on the other. The reality is very different. UK SMEs have a number of financing options available to them, including thriving independent funders. Bibby Financial Services is one such funder, acting as the lifeline for small businesses during the recession and ensuring their survival. Now Bibby is helping these crucial businesses return to growth.

The political parties seem to believe that more quangos will solve all of SMEs’ problems. But will a Small Business Administration, a Small Business Conciliation Service and a British Investment Bank foster growth in the crucial SME sector? The next Government should focus on making all the options available to SMEs self-evident to business owners and decision-makers, rather than creating more public bodies. Equally the manifestos favour forcing more responsibilities and broader remits onto the British Business Bank. But surely narrowing its remit to the provision of financing for those SMEs that need it most is the most effective route forward.

The main parties have heaped praise on peer-to-peer lenders, with some planning to increase support for crowdfunding and alternative lenders by aligning them with Local Authorities. However, we must not lose sight of the fact that peer-to-peer lenders are risky and untested. The new kids on the block will not herald the salvation of UK SMEs. Nor do they represent a panacea to the market as a whole.

From our customer feedback, many small businesses are nervous about using these platforms and do not trust them. They prefer more personal and local service which can respond to their specific needs. That is why Bibby is expanding our locations and employee numbers to be nearer to our customers.

The next Government must open its eyes to the size and scale of the financing market serving SMEs. Simply ignoring independent funders who sit between banks and peer-to-peer lenders is not an option. We must prioritise educating UK SMEs about all the financing options available to them. Only then will we improve the UK’s productivity and innovation, areas where we are sadly underperforming against our global counterparts.

Thanks for reading

David Postings

UK CEO, Bibby Financial Services

About David Postings

David Postings is the UK Chief Executive Officer for Bibby Financial Services following his appointment in April 2012. David is an experienced senior executive with over 35 years’ experience in financial services. David has extensive knowledge of the commercial finance landscape.

You can read more about David Postings and his position at Bibby Financial Services in the About Me Section.

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