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03 March 2016

Leadership skills shortfall holding back UK economy

A lack of leadership and management skills is hampering the growth potential of small businesses and acting as a brake on productivity.

A new FSB report found that while three fifths of small business owners say they update their business knowledge and skills at least once a year, specific management training is often lacking.

“The UK’s 5.4 million small businesses boast some of the most dynamic and creative business leaders in the world. However, our research demonstrates how greater investment in management skills could significantly benefit start-ups and scale-ups and help them realise their growth ambitions." said Mike Cherry, FSB Policy Director.

Only a quarter of small firms questioned had undertaken management training in the last 12 months. One in four had never undergone any form of management training at all. FSB also found few smaller businesses seek external management training for staff, with just a fifth (19%) offering such training to their employees.

The FSB report identified many of the main barriers to tackling this issue. Specifically it found the cost and availability of relevant training to be a key factor. 43 percent of firms listed the cost of training as a major challenge and 34 per cent listed availability of relevant training as a problem.

Currently just under half of all new UK start-ups fail in their first three years. Studies suggest that a leading cause of failure is poor leadership and management skills. This skills shortfall partly explains the growing productivity gap, with the UK consistently trailing behind its competitors, falling a full 18 per cent below the G7 average. This is the widest productivity gap with the G7 since comparable estimates began in 1991.

Mike Cherry concluded: "The UK is well known as being a great place to start a business, but we need to get better at helping small firms reach the next level. A key aspect of this is making sure the right management and leadership capabilities are in place, and that these grow in line with the business.

“There needs to be far better support for small businesses who want to improve their capabilities in these areas. If we get this right, we stand a real chance of creating more world beating businesses as well as boosting productivity in the wider economy.”

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