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Business Development & Marketing Finance General

Skills shortages and recruitment problems for SMEs amid ongoing Brexit uncertainty

skills shortages and recruitment problems not just for fruit pickersI try to avoid the dreaded “B” word in my blogs but on this occasion, I can’t avoid it as the chorus of business voices highlighting skills shortages and recruitment problems grows larger and louder.
It is no good for Government to assert that it will all be fine once negotiations on the UK’s leaving the EU are concluded when the situation is no clearer now than it was when all this started almost two years ago.
Somehow, businesses need to carry on in the interim as well as planning for the future.  Some things just cannot wait and high on the list is where and how they are going to source the people they need at all skill levels, whether or not they trade abroad.

Some facts about skills shortages and recruitment problems

Firstly, the most recent complete set of immigration figures, published by the ONS (Office for National Statistics) showed that, in 2017, more EU citizens, 139,000, left the UK than came here to work, 101,000. This was the lowest level for five years.
The independent “think tank” Global Futures calculated that the fall in immigration since the decision to leave the EU was already costing the UK public finances more than £1 billion per year and research by Scott-Moncrieff found that 51% of SMEs put Brexit at the forefront of their worries, with even those not trading abroad linking it to a decline in spending and to skills shortages.
This translates on the ground to data from the West Midlands Chambers of Commerce revealing in their quarterly report that 53% of their members were reporting recruiting difficulties and YouGov figures reporting that 23% could not retain EU nationals.
In East Anglia, the business section of one regional paper highlighted interviews with SMEs, one of them with a small local electrical contractor who had been searching fruitlessly for qualified new recruits for five months.
Equally, there are regular reports of a shortage of nurses, doctors and other health care professionals in the NHS and care homes too are finding it hard to get staff.
I have noted in past blogs the sectors where qualified people have been in short supply for many months, including in construction, the Tech sector and in engineering. The Daily Telegraph has calculated that half of all postgraduates skilled in AI had migrated overseas, 33% to leading US tech firms, 11% to North American universities and 9% to smaller US businesses – a new “brain drain” in the making?
As far back as July the Independent was reporting that six in 10 businesses have had to spend money on extra incentives, pay rises and bonuses ranging in value between £5,000 and £100,000 to persuade skilled EU workers to work for them.

What action has there been to address skills shortages and recruitment problems?

Doubtless the Government, if challenged, would say that it is listening to businesses although the message does not seem to be getting through or is being treated with some scepticism.
Given that the UK has near-full employment, even unskilled workers may be able to command a premium and there have already been warnings from farmers that recruiting enough seasonal fruit and veg pickers is a serious problem.
In late August the Home Office announced that it had developed an online “toolkit” to help UK employers to register EU citizens with a new immigration status following Brexit and to help those citizens to get their new immigration status. This has yet to be tested and given the government’s less than stellar track record on commissioning new IT solutions it remains to be seen whether it will be user friendly.
Then there is the apprenticeship levy and the Government’s target of having 3 million new apprenticeships in place by 2020. This has hardly been a resounding success with the numbers of places having slumped over the nine months of the 2017-18 academic year by 34% compared to the previous nine months. Last week the FSB (Federation of Small Businesses) revealed that there had been a further slump in new apprenticeships in the year to June, down by 28%.
Not surprisingly, the FSB, the CBI (Confederation of British Industry), the IoD (Institute of Directors) and the BCC (British Chambers of Commerce) have all called for the scheme’s urgent reform.
The question is whether the Government will do more than “listen” to business concerns and actually do something practical that works.

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Business Development & Marketing Cash Flow & Forecasting Finance General

Are apprenticeships affordable for SMEs?

young apprentice learning to operate a mechanical sawAt the start of 2016 the Federation of Small Businesses (FSB) calculated that of the 5.5 million businesses in the UK an estimated 99.3% of them were SMEs, employing around 15.7 million people and accounting for 60% of UK employment.
Of these SMEs, which have increased by 59% since 2000, 95% fall into the Microbusiness category of those employing fewer than 10 people.
Representing just about every industry sector, SMEs are clearly a crucial part of the UK economy and, like their larger compatriots, many complain of skills shortages particularly in key sectors such as construction, engineering and catering.
No surprise then, that SMEs could be a fruitful location for apprenticeships and in August 2016 the FSB produced a report on the potential barriers to increasing their involvement.
While they found that a quarter of SMEs that currently have no apprentices would consider getting involved the FSB concluded that “more information and financial support are needed to help SMEs understand how apprenticeships work, what the costs are, what the benefits might be, and how to go about finding the right talent to help their business.”

Are grants enough to make apprenticeships affordable for SMEs?

Employers can receive up to 90% towards apprenticeship costs under the new Government scheme to be launched this May, one month after the apprenticeship levy on larger businesses begins on April 1.
The Government has also said that “Businesses with under 50 employees won’t pay anything if they employ apprentices under the age of 19, and will receive a £1,000 payment with an additional £1,000 payment to the training provider.”  In the recent budget, there was also a pledge to overhaul by 2020 the system of post-16 educational qualifications in areas such as engineering, design and construction, to just 15 so-called T-levels.
However, the smaller SMEs are often time and cash poor and it is debatable whether there is the spare capacity, regardless of the help towards the training costs, especially given the time and resources needed to train and administer new staff, let alone apprentices.
Concerns about the literacy and numeracy levels of school leavers could also add to the costs of taking on an apprentice and it must be remembered that apprentices are also employees so there will be additional costs such as NI contributions.
The Government issued a large collection of guidance notes earlier this month on the 15 funding bands, how the scheme will work, guides for employers, parents, approved training agencies, standards for specific industries including everything from fence installers to banking relationship managers reportedly with more to follow. This may help with the FSB’s concerns from last August.
But do SMEs, whose employees tend to be multi-disciplinary and fully occupied, have the time and capacity to also do all this additional online research as well as providing the in-house day-to-day management of schemes and the compliance rules that must be met?
The FSB analysis, perhaps not surprisingly, showed that numbers of SMEs are higher in Southern England relative to the resident population.
So, a warning this week from the Institute for Public Policy Research (IPPR) is particularly timely. It suggests that the apprenticeship levy, will raise less money and have a smaller impact in the areas that need it most, those that have been hit by deindustrialisation and suffer from low levels of qualifications, low productivity and low pay.
The new focus on upskilling young people to join the work force without a university education so that they do not end up in the cul de sac of unstable “gig” economy jobs and have some hope for future career progression is to be welcomed.
But there are plainly many questions about the costs in time and money before SMEs can feel confident that taking on apprentices is for them.

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Business Development & Marketing Finance General

Why do so many SMEs fall short when taking on new employees?

man contemplatingIn the next in our series of August business ideas to ponder at leisure we’re looking at recruitment, induction and staff loyalty.
Generally, employers hope to recruit employees who are already trained, qualified or competent for a position on the grounds that they will become productive more quickly once they start.
However, for some time there has also been complaint from employers that they find new recruits, including graduates, to be weak in basic literacy and numeracy, or people skills, and over time that they are not as loyal or committed as expected.
While recruiting experienced staff is viewed as ideal, most companies want to pay as little as possible and end up employing inexperienced staff.

Training, induction and loyalty

In our view the inexperience of staff is linked to whether or not they are valued. There are however solutions.
Firstly, why not consider taking on people who are younger and less set in their attitudes and investing in training them, not only in skills but also in the business’ ethos and work culture?
Secondly, leaving aside the skills problem for a moment, how much of the loyalty problem is due to an inadequate and often far too short induction process?  Often SMEs pay little attention to these essential underpinnings.
Perhaps they do not really value their employees, nor do they value the time and investment needed to make employees feel truly valued.
This is often characterised by a failure to induct new recruits or even to provide proper support to existing employees. All too often staff feel they are competing with colleagues rather than collaborating with them for their collective benefit.
Arguably paying attention to welcoming, training and helping newcomers to the workforce to settle in will help to make them feel valued and encourage a level of loyalty to the company that has shown an interest in their development and given them a chance.
Lastly, on the subject of loyalty, employers often complain that after they have invested money in training staff who then leave for a better opportunity.  In our view seeing this as money wasted is a too narrow viewpoint, particularly post Brexit. The goodwill generally endures.
If, as seems likely, recruitment from overseas post Brexit becomes severely limited and bureaucratic it has already been said that for the UK to be competitive it needs to upskill its workforce. The lack of home grown skills has been an issue in the UK for some time and the situation will only become more urgent, so investing in the workforce is something every business and employer should consider contributing to for everyone’s eventual benefit sooner rather than later.

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Banks, Lenders & Investors Business Development & Marketing General Rescue, Restructuring & Recovery Turnaround

Can the UK have a balanced economy?

A new YouGov poll of voters has discovered that at least 85% of them want to see a strong emphasis put on manufacturing by the next government believing that there will be greater economic security in a more balanced economy.
The British Chambers of Commerce (BCC) has also warned recently that the recovery could risk being stalled unless more is done to balance the economy away from a disproportionate reliance on consumer spending.
ONS figures show that manufacturing makes up just 10% of the UK economy despite chancellor George Osborne’s call for a “march of the makers” in the early days of the current coalition government.
But why are we surprised?  Industry, particularly but not only construction, regularly highlights difficulties in recruiting people with the right skills and this is the result of years of neglect.
Young people have not been encouraged to believe in, or aspire to careers using practical skills, in fact quite the opposite.
Inevitably, even if a shift of emphasis and a change of direction that encourages young people and others to value the training acquired through an apprenticeship or college as highly as a degree currently is, it will take some years before the skills imbalance can be corrected.
Then there is the question of whether manufacturing can ever compete in an export market that includes China, India and others, where production and wages costs are so much lower than in the UK.
And finally the question of funding where investors in particular for some years have disliked industries that tie up capital and have high fixed overheads, whether this is due to perceived risk or the long-term nature of such investments.
Is it already too late to revive an industrial base in the UK (or possibly England given today’s vote on Scottish Independence) and what kinds of goods can we manufacture in such a way as to be competitive?

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Banks, Lenders & Investors Business Development & Marketing General Rescue, Restructuring & Recovery

When will businesses invest in the future?

It is hardly a closely-guarded secret that the UK’s largest companies are holding onto a large pile of cash, estimated to be more than £300 billion.
While the Government is expecting recovery from the 2008 economic crisis to come from the private sector, the latter remains focused on minimising tax bills and maximising short term rewards to shareholders and CEOs, while avoiding risky investment at all costs.
One of the major complaints among businesses at all levels is that they are finding it hard to recruit the skilled and educated people they need. At the same time investment in research and development is dwindling.
There can be no future reward without taking some risks and thinking for the longer term but businesses also have to recognise that their activities are also made possible because of the benefits they derive from a combination of the physical infrastructure and education system, the so-called public goods that are often taken for granted.
Perhaps it is about time that businesses realised that if they want to grow and develop and if they want a supply of educated people, they need to take some responsibility by unlocking some of their capital to support innovative new enterprises, to invest in Research and Development in our universities and in their own companies and to help the existing and future workforce to acquire the skills companies say are in short supply.
This may require a degree of restructuring of companies’ own operations and at the very least restructuring their current short term, risk-averse thinking to enable investment over a longer period.
While the Government is considering closing the loopholes that make tax avoidance possible it could perhaps also consider a tax on unused capital sitting on company balance sheets to stimulate some investment in the economic future of UK Plc.

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General Rescue, Restructuring & Recovery Turnaround

Bring Back Pride in Non-Academic Skills

August may traditionally be the “silly season” but last month the news did not stop rolling with turmoil on the world’s markets, the A level results and furious debates about the causes and consequences of the UK riots.
We argue that it is time for some joined-up thinking, as there is a connection between the three.
First, the markets: growth, even in the EU’s so-called engine of growth, Germany, was revealed to be near-stagnant in Q2 and UK Growth has been near stagnant for the last three quarters. The UK unemployment figures for the same quarter rose by more than 38,000 and the youth unemployment rate rose to 20.2%, from 20%. All this has prompted fears of a double dip recession, a return of pessimism among UK employers and turmoil on the markets.
Economic recovery is supposed to depend on manufacturing, exports and crucially growth in the UK’s small business sector. However, a new British Chambers of Commerce survey of 2,200 SMEs employing fewer than 10 people, has revealed that while more than 55% were actively recruiting, they were held back by a lack of sufficiently skilled applicants and only 22% said they would feel confident that a school-leaver with A-levels or equivalent would have the necessary skills for their business.
Secondly, following the A level results, it was revealed that approaching 200,000 candidates were seeking a university place through clearing and only an estimated 30,000 places were likely to be available. What happens to those who are unable to get a place?
Finally, the riots and their causes: as the culprits have been wheeled through the courts it has become clear that the overwhelming majority have been under the age of 25, half of them under age 18, and all living in some of the most deprived areas of the country, young people who are unlikely to go to university but, worse, have little hope of acquiring the skills they need to get any kind of job.
K2 argues that the focus of successive governments on pushing more and more young people through university has devalued both the degree itself and the more practical vocations and trades on which economic recovery depends.
According to the REC although more than 250,000 apprenticeships were created in the last financial year this figure includes a big increase in short-term apprenticeships – often taken up by those already in employment and a greater number of these positions have gone to the over 25s. training and being used as a source of cheap labour.
Career advice for young people has also all but disappeared. New figures published by the public service union UNISON showed only 15 out of 144 councils still run a full careers service after implementation of government cuts.
The most crucial need is to restore the pride and aspirations of those young people who perhaps would not benefit from a university education so that they believe that they can both earn a living and use their practical skills to contribute to economic recovery and growth.