Lloyds Bank

British small firms fear workforce skills gap could hit profits and growth

19 August 2013

  • Almost two thirds of British SMEs state that there is a ‘skills gap’ in their workforce
  • Many worry that the gap could stunt growth, hinder competitiveness, or dent profitability
  • Sales and marketing are the key disciplines businesses say they need to improve
  • Lack of time and budget are seen as the main barriers to improving skills
  • SME investment in skills has remained static over the past year, but many say they plan to invest more in the future

Thousands of British small and medium sized businesses (SMEs) are suffering a ‘skills gap’ in their workforce which they fear could stunt growth, limit competitiveness, and dent their future profits, according to a new report from Lloyds TSB Commercial Banking. The study shows that while most businesses state they want to address the perceived lack of skills amongst their workers, many say they do not have the time or allocated budget to do so.

The report shows that six out of ten (61 per cent) SMEs believe that there is a shortage of skills amongst their workers. A quarter of these (27 per cent) feel that there are gaps in sales and marketing skills; one in five (21 per cent) believe IT know-how is an issue; and almost one in six (15 per cent) cite management/leadership skills as a key area of development. Just over one in ten (12 per cent) consider project management skills as a cause for concern and a near equal amount (11 per cent) mention team building skills as an area that could improve.

Businesses cite a number of reasons for not developing skills amongst their workers. The main obstacle, cited by nearly four in ten businesses (38 per cent), is budget constraints, while more than a third (35 per cent) blame time pressures. Just over one in ten (13 per cent) say they have difficulty in finding the right training and a similar number (12 per cent) are concerned about investing in developing skills for employees who may soon leave the business.

Businesses raise concerns due to skills shortage
The overwhelming majority (95 per cent) of SMEs that have identified a skills gap in their workforce believe it has a detrimental impact on their business. Their main worries are that a lack of skills will:

  • damage future growth potential (44 per cent)
  • inhibit their competitive edge (39 per cent)
  • make them less profitable (37 per cent)
  • stifle innovation (24 per cent)
  • harm staff morale (19 per cent)
  • negatively impact staff retention (12 per cent)
  • reduce recruitment opportunities (11 per cent)
  • make them less attractive to investors (nine per cent)

Whilst there is a clear feeling amongst the majority of SMEs that they need to do more to address their skills gaps, just under a third (30 per cent) feel that their employees do have the appropriate skills and do not require additional training. This is particularly the case for SMEs with fewer employees.

David Oldfield, Managing Director, SME and Mid Markets Banking said:
“If businesses are to seize opportunities for future growth and profitability, investment in skills needs to be at the top of their to do list. While there are some businesses that claim they have the skills they need for the future, most do recognise a need to develop skills across their workforce and can pinpoint the key areas in need of improvement. Given the recent economic headwinds that British businesses have had to endure it is understandable why some have not been able to make skills development a priority, but if they are to reach future potential growth they’d be wise to consider doing so now. ”

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