Shortage of skilled staff ranks as biggest growth obstacle for SMEs

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With 50% of small businesses with over five employees planning to grow their headcount over the next two years, finding skilled staff tops the list of challenges business owners face, up from third place in 2015, according to a new report by independent venture capital investors Albion Ventures.

The skills shortage is most acute among London-based small firms followed by those in the South East and the North West, the report reveals. On a sector basis SMEs in the manufacturing industry reported the highest level of concern about finding skilled staff, followed by those in the technology and telecoms sector and construction businesses in third place. Conversely, finding unskilled staff has fallen to 15th place in the list of SME challenges.

staff-neededThis is the first time that SMEs have identified a shortage of skilled staff as the biggest obstacle to growth, ahead of red tape and regulation, ranked in second and third places in 2016. Political uncertainty and leaving the EU were ranked in fourth and sixth place respectively suggesting that small business owners are most concerned with tangible obstacles to growth rather than those over which they have less control.

According to the fourth Albion Growth Report, which is based on interviews with 1,000 SMEs, the biggest skills gap reported by over a quarter (26%) of SMEs is marketing, followed by new technology (21%) and business planning (17%). The smallest skills gap is in Financial Management with only 9% of small business owners reporting problems.

On a regional basis, entrepreneurs in the East Midlands are the most underpowered in marketing with a third (32%) lacking expertise in this area, followed by those in the West Midlands and the South West with 30%.

The technology skills gap is the widest in Scotland (34%) and London (25%). A quarter (26%) of businesses in the North East felt they lacked expertise in HR, the highest in the UK.

Albion Ventures managing partner Patrick Reeve commented: “A shortage of skilled staff shows that the growth pressures on the economy are at the most sophisticated end of the scale, which is precisely where we can expect to generate the biggest returns. The economy is coming under capacity constraints at a time of considerable political uncertainty.

“Policymakers charged with deciding our post-Brexit future must recognise that many of the skills that enable us to compete in a fast-changing and increasingly competitive world are in short supply and our best chance of overcoming this challenge is by building on the UK’s first class reputation as a home for global talent.”

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