By Charlotte Keenan, below, head of Goldman Sachs 10,000 Small Businesses in the UK
Throughout the recent general election campaign, the Labour Party acknowledged that addressing the UK’s skills challenge is essential to their fundamental mission of achieving economic growth. With the small business economy experiencing a skills shortage big changes are needed and fast, so it is notable that this critical brief has gone to Jacqui Smith, an experienced former Minister, who is well-versed in navigating Whitehall.
It’s also a welcome signal, alongside the proposed establishment of Skills England; a new body to help train up the existing workforce, that the Starmer premiership is serious about putting this issue at the centre of its strategy for economic growth.
Small businesses represent 99% of all private sector enterprises, employing 16.7 million people in the UK, yet over half of them are unable to access the talent they need and only 12% believe the education system is equipping young people for the future of work. That is according to a 2024 survey as part of the ‘Generation Growth Small Business Manifesto‘ from the Goldman Sachs 10,000 Small Businesses programme (10KSB UK).
And while there have been five major reviews of post-16 skills policy since 2010, it appears we are no closer to solving the problem. With a shortfall of 2.5 million highly skilled workers and a surplus of 8.1 million with low-intermediate skills, the time to act is now.
If we are to support fast-growing small businesses and foster the next generation of growth, we must address the ongoing problems surrounding talent. This boils down to two key issues; educating the future workforce and upskilling the existing one.
A curriculum that works for business
It is concerning that only 12% of small business leaders believe the education system is effectively preparing young people for work. In a world where education will inevitably struggle to keep up with rapidly changing technology, small businesses need young people to come into the workforce ready to contribute.
To bridge this gap, small business owners want to see enterprise become part of the school curriculum, building a range of hard skills including general IT skills, financial management and accounting, as well as softer skills, such as presenting and public speaking.
Embedding practical, industry-relevant skills into the school curriculum will foster a deeper understanding among students of what the modern workforce requires. Crucially, by pushing enterprise skills to the forefront of secondary education we can help create a workforce that is flexible and entrepreneurial; ready to adapt to whatever the next digital revolution throws at us.
Upskilling the existing workforce
Changing the curriculum may help deliver the next generation of work-ready young people, but we also need to address skills shortages impacting businesses today. The World Economic Forum’s Future of Jobs 2023 report finds that six in ten workers will require reskilling by 2027, but only half will have access to adequate training opportunities.
Increased training is directly correlated with higher productivity. However, the amount employers spend on training their workers has dropped by almost a fifth in the last decade, according to the New Economics Foundation.
Many small businesses struggle to fund employee training, especially for skilled roles. They often find it cheaper to hire already skilled workers, typically from abroad, rather than invest in their staff, underscoring the need for rethinking existing initiatives such as the Apprenticeship Levy.
We need to find ways to give SMEs access to the right kind of training at a cost they can afford. Labour’s recently announced Skills England Bill which will reform the apprenticeship levy is one potential route to this. It will look to provide better coherence to the assessment of ongoing skill gaps, to ensure training programmes are well-designed and meet the needs of both regional and national skills systems. It must offer SMEs flexibility to source the training they need to upskill their teams.
In the meantime, the small businesses in our 10KSB UK programme want the government to explore the potential for mutually beneficial visa waivers, so they can plug the skills gap in the immediate term.
If we are to energise the small business ecosystem that is so critical to the UK economy we must improve access to employees with the skills that they need. Solving the skills shortage requires collaboration between the currently siloed sectors of education, business and government, all while placing the voice of small businesses at the forefront of policy discussions.
The Growth and Skills Levy has potential and it’s a positive sign that Labour are serious about addressing the skills crisis. If the new government continues to listen to the concerns and needs of small businesses, we can create a more resilient and adaptable workforce, ultimately driving economic growth and competitiveness.
