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03 March 2016

Leadership skills shortfall holding back UK economy, says FSB

A lack of leadership and management skills is hampering the growth potential of small businesses and acting as a brake on productivity, according to a new report published today by the Federation of Small Businesses (FSB).

The FSB report, ‘Leading the way: boosting leadership and management in small firms’ shows how policymakers, small businesses and partners in the private sector can join forces to tackle the UK’s leadership and management skills deficit

The report found that while three fifths of small business owners (59%) say they update their business knowledge and skills at least once a year, specific management training is often lacking.

Only a quarter of small firms questioned (25%) had undertaken management training in the last 12 months. One in four (26%) 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, Policy Director for the FSB, said:
“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.

“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.”

Tackling these issues will be at the centre of discussion at a joint high-level roundtable hosted today (Thursday) by FSB and the Chartered Management Institute (CMI).

During the roundtable, which is being held at the CMI offices in London, delegates from across government, industry, higher education and Local Enterprise Partnerships (LEPs) will seek innovative solutions to address the UK’s leadership and management skills deficit.

A key finding of the report is that the private sector, including finance providers and professional associations, has a key role to play in supporting small firms to boost their leadership and management capabilities.

Areas of discussion and recommendations identified by the FSB paper include:

  • The development of leadership and management taster courses which are flexible and available online and on demand. A training module in leadership and management could be also offered as a key part of the package provided as part of the Start Up Loans scheme.
  • Greater involvement from finance providers and professional associations. The initial point of contact for many small firms are banks and professional associations. This leaves them ideally placed to help smaller firms find and access suitable training opportunities.
  • Businesses supporting businesses. Peer networks, including Growth Hubs, LEPs, universities and business schools all provide useful environments, resources and facilities in which to inform and encourage best practice among small firms.