From education to employment

A strong and agile skills base is the foundation of any modern and successful economy

Chinara Rustamova, Senior Policy Advisor, Education and Skills, The Federation of Small Businesses (FSB)

#Skills and training challenges in small businesses

It has been encouraging to see the increased focus on skills across the UK’s political landscape.

In small and medium-sized businesses, which make up 99.9% of all businesses in the UK, skills and training challenges are faced by both business owners and their employees which manifest themselves across the following seven themes:

  1. Chronic skills shortages and gaps (lack of appropriately skilled staff; sectoral differences)
  2. Brexit and immigration-related skills challenges
  3. Regional skills challenges
  4. Lack of digital skills and leadership and management skills (business productivity)
  5. Automation and AI-related skills challenges (future of work)
  6. Lifelong learning in the context of ageing society
  7. Entrepreneurial skills

1. Chronic skills shortages

At the Federation of Small Businesses, we regularly assess the confidence of the small business community through the quarterly Small Business Index (SBI). Among other things, the SBI asks small businesses to indicate the major barriers to achieving growth aspirations. The SBI acts as an excellent lens to monitor the skills needs of the economy.

Access to “appropriately skilled staff” remains one of the top three most widely referenced concerns.

2. Brexit related skills challenges

“Appropriately skilled staff” in small businesses can be the products of the UK’s and the other countries’ education systems.

Our research shows that one in five small employers employ staff from the EU.

A number of FSB members have lost EU staff since the EU referendum in 2016. Continued access to EU skills will, therefore, be vital to the economic success of the UK.

3. Regional skills challenges

The national skills challenges and opportunities should be considered in regional contexts. Clearly, skills needs and challenges, for example, in London will significantly differ from those in the North East. This is why it is important that the Skills Advisory Panels across England work with small businesses to identify the regional variations in skills needs, especially sectoral differences, and gaps in education and training provision.

Alongside that, we also need a central function that will link up all the different skills challenges and their regional disparities to provide a nationally coherent picture. Such a function should also monitor trends, forecast the future skills needs of the economy and make recommendations for addressing any gaps.

To build a more resilient post-Brexit future, there also needs to be an increased focus on appropriately skilled workforce coming through the UK education and training system. Although a lot more needs to be done, the reforms and developments in various educational areas are helping to improve the system.

4. Digital skills and leadership and management skills

FSB welcomed the increased focus on technical education and engaged with the new initiatives such as T levels and the National Retraining Scheme. We are yet to see the impact of both these programmes and their benefit to smaller employers and other stakeholders.

The apprenticeship reforms, on the other hand, have already been implemented. Although, generally successful, an imminent overspend is looming over the sustainability of the entire system. It is important that the Government provides more funding so that non-levy paying employers, who are mainly small businesses, continue to access apprenticeship funds. Apprenticeships can play a significant role in addressing productivity challenges for businesses and help them to grow.

Other contributors of productivity in small businesses are robust leadership and management skills which may lead to improvements such as digital adoption and better working practices.

5. Automation and AI-related skills challenges

Digital skills help increase a turnover in a business and are even more important in the context of changing nature of work due to automation and technological advancements.

6. Lifelong learning in the context of ageing society

This is why lifelong learning is a necessity that should help the workforce to stay up-to-date with ever-changing world of skills, especially given the fact that we now live much longer and would be working longer.

Resilience to restart your career and to continue to learn throughout life should, therefore, be developed at an earlier stage in life.

That alone would not be enough – there needs to be far more opportunities for adult learning which is dramatically low at the moment. Among other things, the Government must encourage small businesses to invest in their own and their employees’ skills.

7. Entrepreneurial skills

There should also be lifelong learning opportunities for people to start their own businesses and become entrepreneurs.

The provision of enterprise education at all stages in life has to be reformed to provide children, young people and adults with entrepreneurial skills that will set them up for the future.

As a form of entrepreneurship, self-employment might be one of the best ways to start a new career at a later stage in life. Pupils and students should be given opportunities to learn how to become self-employed through the education system and careers guidance in schools. Self-employed should be given more opportunities and incentives to train and retrain.

The £3 billion National Skills Fund that has been pledged by the Conservatives will provide match-funding for individuals and SMEs for education and training. A proportion is planned to be reserved for further strategic investment in skills.

All in all, the Fund makes the future of skills for small businesses look promising and should help address the skills challenges faced by smaller firms.

Chinara Rustamova, Senior Policy Advisor Education and Skills, The Federation of Small Businesses (FSB)

Apprenticeship starts have plummeted by around 20 per cent since the introduction of the Levy and new Standards. Non-Levy small businesses are struggling to access funding for the apprenticeship slots that they are prepared to offer.

Tom Bewick interviews Chinara Rustamova, who authored the FSB’s report, ‘Fit for the Future: Making the Apprenticeship System Work for Small Businesses for the Oct 2019 episode of #SkillsWorld:

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