According to new research by the Gatsby Foundation, the second-biggest overall concern for small businesses is their struggle to recruit new staff.
With 97% of employers in England being small businesses, the struggle to recruit new staff will add to the already challenging situation. Almost 1 million small businesses are concerned about their difficulties in finding new staff with the right skills.
Small businesses are the backbone of our economy and society, but there’s no doubt they’re facing a tough year ahead.Jenifer Burden MBE, Director of Programmes at the Gatsby Foundation
While the rising costs are still the main concern, with 51% of small businesses naming it as major concern, the difficulties in finding new staff with the appropriate knowledge and skills is close second with 43%.
Why Small Businesses Struggle To Recruit New Staff
When the first COVID-19 lockdown was introduced, many small businesses were unable to keep on staff due to the financial strain caused by national lockdowns. As a result, they had to cope with reduced staffing levels and a lack of skilled staff.
Since the lifting of all restrictions, and an upturn in spending, many small businesses have started hiring again, but they now struggle to recruit new staff with the skills they need. According to Office for National Statistics (ONS) figures, there were 1,300,000 job vacancies between March to May 2022.
This record number is an increase of 503,900 from January to March 2020, before the pandemic hit.
The hospitality and tourism sectors especially struggle to recruit new staff, with 82% of businesses in this sector thinking that it is harder to find staff now than ever in the past, according to a study by The Caterer.
55% of businesses surveyed by the Gatsby Foundation identified a lack of skilled candidates as the reason for the difficulties in recruitment. So where are all these skilled workers?
As a result of Brexit and the pandemic, many foreign workers have left the UK and are yet to return. This has highly impacted the hospitality and tourism sectors, which rely on foreign staff.
But the pandemic has also led to many people reevaluating their careers and lifestyles, which has led to a flood of resignations, which was called “the great resignation” by the media.
However, the research by the Gatsby Foundation has also found that small businesses also find it hard to retain staff and boost productivity, which adds to the difficulties.
Staff Retention Another Issue
Only 38% of small business owners stating that their employees took up training in the past 12 months.
Not only does this mean that workers don’t have the opportunity to learn new skills to progress their careers, but it also makes companies less desirable in the eyes of potential new staff, which will add to the struggle to recruit new staff.
While small businesses do understand that employees want a “clear route for progression” and “opportunities to develop new knowledge and skills”, 86% said they face barriers to upskill existing staff.
One reason small businesses find it difficult to train their employees is because they find the current education and skills landscape confusing.
As our research shows, one of their major challenges is getting to grips with the education and skills landscape, which has changed and can be complex to understand.Jenifer Burden MBE, Director of Programmes at the Gatsby Foundation
However, rising costs also prevent many small businesses from investing in staff training and development.
The shift to remote working during the pandemic has also impacted on staff training. According to research undertaken by LinkedIn, 69% of young people (between 16 and 34) believe that the pandemic has negatively impacted their professional learning experience.
And with hybrid working becoming more established, even after COVID-19 restrictions have been lifted, many employees divide their time between their office and home. This will make it even more difficult for small businesses to train and upskill their staff.
Not only will it be more difficult to engage employees in training programmes, but with less time spent in an office environment, learning from more experienced colleagues is reduced.
Difficult Time Ahead For Small Businesses
With all the challenges facing small UK businesses it is not surprising that there were 1,691 company insolvencies in June 2022, which is 40% higher than the same month the previous year and 15% higher than in June 2019, before the pandemic hit, according to the latest Official Government insolvency statistics.
Creditor’s Voluntary Liquidations have risen by 30% compared to June 2021 and by 44% compared to June 2019.
Inflation is still rising and the Bank of England is expecting it to hit 11% this year. Energy costs are predicted to rise again in autumn, pushing up the costs of running a business to ever greater heights.
Combine these financial pressures with the struggle to recruit new staff and retain existing workers, and it is clear that small businesses will have to deal with challenging times ahead.