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FSB London response to the New Draft London Plan

2 January 2018

Introduction

The Federation of Small Businesses (FSB) is the UK’s leading business organisation. It exists to protect and promote the interests of the self-employed and all those who run their own business. The FSB is non-party political and is also the largest organisation representing small and medium sized businesses in the UK.

Small businesses make up 99.2 per cent of all businesses in London, and make a huge contribution to the UK economy. They contribute 44 per cent of London’s GDP and employ 39 per cent of the workforce[1].

The FSB carried out a consultation event on the Skills document with the Deputy Mayor for Skills, Jules Pipe, on the 1st December.

Small firms are investing in their staff, but very often through more flexible bite sized chunks and often informal methods – which are often unaccredited and more on the job based.  The cost of apprenticeships, lack of time to devote to training, concerns around their day to day management and difficulty accessing information are just a few of challenges identified by smaller firms. How we capture the training that takes place that goes unaccredited by the business owner or other employees will be very beneficial to London.  

The consultation focusses on three key objectives:

  1. Empower all Londoners to access the education and skills to participate in society and progress in education and in work;
  2. Meet the needs of London’s economy and employers, now and in the future; and
  3. Deliver a strategic city-wide technical skills and adult education offer.

  1. Do the three objectives address the needs of employers and the economy?

    The first objective is focussed on individuals and makes no reference to making sure that the businesses in London have the right skilled people to be able to employ Londoners instead of having to rely on a workforce from outside of London.

    A comprehensive analysis of the skills needs for the next three, five and ten years needs to be undertaken, followed by an action plan to help skill those entering the jobs market, and those moving from benefits to employment, to take those positions.

    Also, lifelong learning needs to be included as the likelihood is more people will be ‘self-employed’ with portfolio jobs i.e. monetary skills in budgeting and time management.

    The focus of the objectives must be on lifelong learning from cradle to grave. We must not get drawn into picking winners or focussing wholeheartedly on the impending Adult Education Budget devolution to London.  The strategy for employers must be all encompassing to reflect the need for a new skills system that will is ever-changing – for instance coding skills at younger ages, the move away from ‘jobs for life’, the drive towards Artificial Intelligence that will affect many jobs in sectors such as wholesale and retail;  and an ageing population and the effects. 

  2. Will the actions have an impact on business productivity, the availability of technical skills and the relevance of training for our economy?

    Entrepreneurship needs to be embedded in the London Skills ethos – for London to continue to benefit from entrepreneurship.

    We are pleased that the Mayor is seeking to extend the London Enterprise Adviser Network.  The opportunities for small firms to have a greater influence in informing curricula and the careers offering in early stages of education and further education is the right policy lever. For the strategy to be a success getting greater levels of business engagement (big and small) at all levels will bring short term and long-term benefits to the future workforce and small businesses. 

    There needs to be sufficient pressure on schools to engage with local businesses for careers advice. Businesses do want to go into schools and provide this advice but there is a lot of bureaucracy and a perception that schools are too focused on getting children through the education system. More business engagement would also promote work experience and raise awareness of the flexibility of programmes some employers can offer.

    The school curriculum needs to include more of a focus on life skills and careers advice, and from a much younger age. Students need to have their long-term career path in the back of their mind when they are picking their GCSEs.

    There needs to be a cultural shift in how certain professions are perceived by students, and especially parents. If these shifts could change in London this could influence the wider UK. Similarly, there needs to be a cultural shift in how businesses perceive 16-18 year olds, so that businesses can accommodate the younger generation and retain young people.

    More connections need to be made between employers and education providers so that the expectations of students (within career paths) can be managed. Students are currently unaware of the full spectrum of different career paths, and are therefore demoralised when they are at the ‘bottom’ of the career ladder (rather than understanding it is a necessary step).

    The Mayor is also keen to create a London sector-skills board with sector-skills councils/other employer representative bodies.  This again sends a positive message of engagement.  However, for it to be fully represented there must be an equal balance between micro, small, medium and large sized businesses – and we would support and FSB position on the Board.

  3. What are the most important actions and priorities that will address the skills and training needs of the economy?

    In London there are more prevalent skills challenges than other parts of the UK.  The issue of Brexit will have significant impacts as small firms rely on the talents of EU and non-EU migrants.  This will provide a level of uncertainty.   We must invest in the talent we have in the UK and supercharge the level of upskilling – never had this been more crucial than at this point in time.

    London is also relying more heavily on the use of Artificial Intelligence as Robotics becomes more and more prevalent in business. New employment opportunities in new skills as well as retraining is greatly needed to ensure we do not lose too many jobs to AI.

    Furthermore, instilling confidence that small firms will be able to easily recruit the best and the brightest will be critical.   In a recent FSB Skills Survey, 61% of London members said that regardless of whether they had recruited anyone in the last 12 months or not, the impact of not being able to find people with the appropriate skills is that they would not be able to grow their business – outweighing the national average of 48%.

    There is also the issue of housebuilding and the need to invest in the construction skills our city needs.  The creation of a Construction Academy is welcome.  We want to see smaller housebuilding projects to support the SME housebuilding sector.  The series of hubs that will be established is intended to ‘strengthen collaboration between London’s house-builders and further education providers to improve the quality, accessibility and relevance of training to meet these employers’ needs’, it is vitally important that small firms gain access to those hubs and it is not simply an opportunity purely for bigger construction companies.

In relation to the detailed Questions of the employer/business section of the consultation:

  1. What is working effectively in the skills system in meeting London’s business needs and how can this be built on?

    We are pleased that the Government is investing in policies to strengthen technical education, improve lifelong learning, boost basic skills – including digital – and support local skills development. However, we believe that more can be done to make these policies more inclusive of small businesses and sole traders, helping them to upskill and satisfy their skills demands. What our members need is support that addresses the unique challenges they face, as key members of the business community and important actors in the skills system. Most small firms and sole traders are without either a training plan or budget, which implies that training may not be being undertaken in a strategic way.

  2. What changes are needed in further education to better meet the needs of employers and businesses?

    T-levels

    FSB London is supportive of the move to T-Levels as technical skills/job specific skills are the most important for small businesses in the capital[2]The recent T level action plan stipulates that the compulsory work placements students must undertake should be an average length of 50 working days, for a minimum of 315 hours. FSB research shows that just six per cent of small businesses would offer work placements as they are currently proposed. The mayor should be supporting our calls for the provision of financial assistance, a formal agreement, and clear guidance, to secure enough work placements to meet projected demand.

    Apprenticeship levy

    We support The Mayor’s call on government to provide flexibility on the planned 10 per cent limit that levy-paying employers can direct from their levy account to non-levy paying employers to enable more SMEs to provide apprenticeships. We will be keen to work with him to push for this greater flexibility.

    We encourage the London Enterprise Action Partnership (LEAP) to reintroduce the £3,000 Apprenticeship Grant for Employers (AGE), that was stopped two years ago, but greatly helped micro businesses with a fiscal incentive to take on a new apprentice.

  3. What acute skills issues exist that need to be addressed for particular sectors in London?

    Digital Skills

    Despite clear evidence that better digital capability spurs growth, a quarter (25%) of small firms do not consider digital skills to be important to the growth of their business.[3] That is whyFSB believes demonstrating the benefits of digital to these firms will be critical.  FSB believes a strategic approach to training is essential to support small business growth aspiration small businesses must know where to turn for help on this.  FSB London believes that the LEAP should support this strategic need by effective signposting to good quality and cost effective digital training opportunities in the private and public sector.

    Leadership and Management

    The London Growth hub is locally owned by the LEAP, tasked with bringing together key local, public and private sector bodies involved in supporting business.

    In the Industrial Strategy White Paper the Government announced that it would continue to fund Growth Hubs. With this funding now secured, The London Growth Hub should investigate the appointment of Leadership and Management Champions that can successfully harness their local knowledge, pre-existing networks and experience of working in and supporting businesses to boost leadership and management skills in small businesses. Leadership and management training has only been undertaken by staff in 18 per cent of businesses, and 17 per cent of business owners, in the past year.[4]  With an estimated 67,000 SMEs having engaged with their local Growth Hubs to date, the reach and impact of Leadership and Management Champions in Growth Hubs could be significant.

    The LEAP needs to be much more proactive in helping fill the void of the lack of good quality affordable support for business owners. A significant amount is invested in helping businesses start-up but then there is a void, unless you are deemed to be a potential high growth business, which is a small percentage of the 99.3%. There is a lack of support for the majority of business owners in London.

    Migrant Skills

    Migrants and visitors are hugely important to London and the UK economy. To the jobs market they bring investment, entrepreneurial flair and specific skills, which often cannot be delivered by local training. And international students matter too. The Mayor must continue to present the case to the Home Office of the need for skilled migrants to be able to enter Britain to support small businesses. It is also important that firms, particularly in the tech sector, are able to freely transfer visas between different migrants if they are carrying out specific jobs at varying times and need to be interchangeable – as very often this can be a regulatory barrier for business.

    Many of our members have struggled to obtain key migrant skills from non-EU countries such as expert chefs, IT professionals, professional services experts to niche industries such as Lapidary.  The concern for our members in London is that any future migration system, which includes EU (non-UK) workers, will be as cumbersome as the current system for non-EU Nationals.  The Mayor must continue to press the Home Office on these vital skills needs for London.

  4. What more could be done to encourage employers to further invest in the skills of their workforce?

    The problem in London is that the average business has less disposable income than outside of London and therefore less money to invest in staff. London commercial costs are higher, employment costs are higher as are the cost of transport and deliveries

    Lifelong learning has not been instilled in the modern workforce and this needs to be addressed. It is harder for businesses to get employees to undertake further skills training unless it is fully funded by the employer during the working day - and this is simply not possible in many micro and small businesses where losing a member of the team for a period of time means reduced productivity and earning potential.

    Also, the longevity of employees committed to a company is difficult to establish, so companies are less willing to heavily invest in training for a person to leave and another company benefit from their investment. We need creative solutions to address this issue.

    The cost of taking on an apprentice can be costly to a small business. Our members tell us that it can cost up to £10,000 to train an apprentice in London, which is why we supported a policy of providing ‘fiscal incentives’ through Grants to support small London-based firms taking on apprentices. It is disappointing that this scheme finished in June 2015, however, we would like to see it reinstated.  At a time when small firms are struggling with the costs of doing business in areas such as commercial space and transportation, it would be a sound economic decision to provide low cost incentives to encourage them to employ.>

  5. What more can be done to achieve greater employer engagement in the design and delivery of training provision in London?

    It is important for the Mayor’s Office to work closely with the FSB on creating new ways of creating training and upskilling programmes for the smallest of businesses.  Simply grouping employment into a generic ‘SME’ bracket can be damaging as it covers a business from zero employees right through to 249 employees – and they are completely different creatures by their very nature.

    As FSB research has found, a quarter (24%) of small businesses have not provided any training for their staff in the last year, and a quarter (27%) of business owners have not provided any training for themselves. Conducting this survey has allowed us to gain an insight into what type of training small business and sole traders need, and how they would prefer it to be delivered, including provision that is:

    • Available to do ‘on-the-job’ or flexible to accommodate the resourcing demands of small firms
    • Value for money and guarantees a healthy return on investment
    • Available in areas where there is most need (such as technical skills training)
    • High-quality and business-relevant

    We are aware that some LEPs are successfully collecting and analysing detailed intelligence on their local economy and the skills needed to sustain it, now and in the future. However, we urge the LEAP to carry out a detailed skills and training audit that aligns with Growth Hub priorities and establishes whether local training provision is meeting the needs of small businesses and the self-employed. As part of their role in providing strategic leadership by setting and addressing local economic priorities, the findings of this audit could lead to positive changes in existing training provision that caters for small businesses and the self-employed, and feed into the LEAP’s Skills Strategy.

    Finally, understanding more about small firms’ demand for particular skills could also lead to a more strategic, local approach to building a local pipeline of skills that are valued by business.  By being actively focused on the needs of the genuinely self-employed and small businesses, it will encourage greater opportunities for business to engage in the skills system

    Contacts:

    Matthew Jaffa
    matthew.jaffa@fsb.org.uk