Digital skills gap in small firms holding back productivity

Press Releases 11 Dec 2017

Productivity growth in the UK will stall further without Government and industry action to tackle a digital skills deficit in small businesses, according to new research from the Federation of Small Businesses (FSB).

The research, published on the same day (Friday) the Mayor of Manchester, Andy Burnham, held his second digital summit in the city centre with employers, finds over a quarter (26%) of business owners in England lack confidence in their basic digital skills and more than a fifth (22%) believe a lack of basic digital skills among their staff is holding them back from increasing their digital and online presence.

FSB warns a digital skills deficit in small firms is likely to worsen if a National Retraining Scheme, announced in the Budget to boost digital capability, is not designed with them in mind. 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.

That is why FSB believes demonstrating the benefits of digital to these firms will be critical.

Simon Edmondson, FSB Regional Chairman for Manchester & North Cheshire, said:

“We know embracing digital technology can help businesses in every sector to be more productive. Firms risk being left behind unless they have the skills to take advantage of technology to remain competitive and responsive to their customers.

“While it already seems in Greater Manchester that the issue is being addressed by the Mayor, we need to highlight the benefits of going digital and then make sure small businesses and their staff can access basic digital skills training that meets their needs through initiatives like the National Retraining Scheme. If we can harness the digital potential of small firms, we stand a real chance of creating more world-beating businesses and boosting growth”.

The digital skills gap is only part of a wider skills crisis hitting small firms. The FSB research found a third (30%) of small businesses in England that have tried to recruit in the year since the Brexit vote, have struggled to find workers to fill roles because of acute skills shortages. Skilled trade jobs, including electricians, IT engineers and construction workers are most affected as the labour market remains tightly squeezed.

Even within the workplace, there is a persistent skills gap problem, with half (46%) of small firms lacking full know-how among their staff. Edmondson added: “Productivity is being hampered by nagging skills shortages which are making recruitment a nightmare for small firms. As the UK moves towards Brexit, a technical skills black hole threatens the economy. Small firms tell us that technical skills are crucial to the future growth of their businesses. The clock is ticking to tackle the ever-widening skills gap.”

Despite most small business owners providing some kind of skills training for themselves and their staff over the 12 month period, half (49%) do not have a formal training plan or budget. In addition, three quarters of self-employed have no plan or budget to support training.

A strategic approach to training is essential to support small business growth aspirations, so small businesses must know where to turn for help on this. Small firms say the main barriers to training are the fact that their staff are too busy (25%), training is too expensive (21%) or the type of training desired is not available locally (16%).

“The twin pressures of rapid technological change and Brexit make upskilling the current workforce more important than ever,” Edmondson continued. “Small firms clearly recognise the value of providing training for themselves and their staff, but it can be a struggle to find the time and money, and in some cases even to find the right training locally. Local Enterprise Partnerships (LEPs) must ensure there is relevant, accessible training available to meet the needs of small businesses and the self-employed.

“What’s more, there’s a bigger problem with training among the self-employed who often find themselves so stretched that extra time away from the business can seem more like a burden than a benefit. The Government should encourage more people to train by offering tax breaks to self-employed who attend training to develop new skills, not just to refresh existing skills.”

Notes to editor

  1. ‘Learning the Ropes – Skills and training in small businesses,’ 11 December 2017
  2. On behalf of FSB, independent research company Verve surveyed 1,023 small businesses in England about skills and training between 14 August and 1 September 2017.
  3. Businesses were asked about recruitment in the “last year,” meaning this 12 month period refers to August 2016-August 2017