Skills gap is stifling our growth ambitions and leaving us at a standstill, say small firms

Press Releases 13 Nov 2023

FSB's latest Small Business Index (SBI) results show that 22 per cent of small firms identify lack of skilled staff as a stumbling block for growth in the upcoming year

Small businesses planning to grow continue to face a deep-rooted and unyielding skills shortage, Federation of Small Businesses (FSB) research has found.

The figures, taken from the UK’s largest business group’s latest Small Business Index (SBI) reveals that 22 per cent of small firms now identify the lack of skilled staff as a stumbling block for growth in the upcoming year.

As digital technology continues to develop rapidly and businesses of all sizes feel the impact, 38 per cent of firms in the information and communication sectors report finding appropriately skilled staff as a barrier. This sector requires constant upskilling and amid a digital skills shortfall and vying with larger companies, small businesses find meeting their labour needs challenging.

Similarly, with 45 per cent of construction sector businesses citing the skills gap as a significant hurdle, this poses a concern in light of the Government’s goal to build one million homes – a target small construction firms are essential to achieving.

In other sectors, skills shortages were also an issue for:

  • 28% of manufacturing businesses
  • 23% in the professional, scientific, and technical activities sectors
  • 14% in wholesale and retail trade

Previous FSB research shows that 83 per cent of small businesses have provided an average of seven days training for each employee – underscoring their commitment to maintaining skills to prevent a workforce skills gap.

To make it easier for small firms to upskill, FSB would like to see the Government:

  • Ensure all schools can provide GCSE and A-Level computer science or ICT courses.
  • Ensure skills bootcamps – used by 76% of small firms –continue to play an important role in helping increase the digital skills.
  • Continue to cover 95% of apprentice training costs for small businesses hiring apprentices, easing the upskilling process, and offering incentives for growth.
  • Make training in new skills tax deductible for the self-employed, allowing them to pivot into new areas of business.

FSB Policy and Advocacy Chair Tina McKenzie said: “Small businesses are eager to grow but many find themselves at a standstill, with skills shortages putting a brake on their ambitions. At a time where the economy needs it the most, firms are left hamstrung.

“This impact is especially sharp in construction, where small housebuilders are instrumental. As we shift to the digital age, too, it’s essential to support the self-employed to branch out and upskill without being held back by the tax system.

“One of the main things we hear from our members is how difficult it is to recruit at all skills levels, which is why we need to invest in lifelong learning.  This cannot happen overnight but will unfold over time and needs supply-side reforms to make it work.

“The future of our economy relies on skills. Unless we create pathways for small businesses to tap into a readily available talent pool, the economy is at risk. This is more than just patching over a hole in the ceiling – it’s about empowering a workforce that can propel the economy forward.”

Notes to Editors

1) The full Small Business Index (SBI) Q3 2023 survey can be found here.

2) The statistics are from FSB’s Small Business Index (SBI) Q3 2023 survey, sponsored by Google. FSB surveyed 816 small business owners and sole traders between 14-28 September 2023.

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Anna Slater

Anna Slater

Deputy Head of Media and Communications