Small businesses face growing pressure to invest in skills and training

5 minutes ago

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Small businesses play an important role in helping people develop skills and gain valuable experience, but new research from the Federation of Small Businesses (FSB) highlights that small businesses face growing pressure to invest in skills and training.

The FSB’s Learning Curves report looks at the role small businesses play in developing skills, supporting young people and providing routes into employment. It also highlights the barriers that can make training, apprenticeships and work experience difficult for smaller employers.

Rising costs are affecting training budgets

For many small businesses, investing in employees is important, but it can be difficult to find the time and money to provide training when employment costs are increasing.

According to the FSB, 32% of small employers have reduced their training budget because of higher tax bills, while a further 27% have reduced training because of rising labour costs.

This creates a difficult balancing act. Businesses need skilled employees to remain productive and competitive, but the cost of employing and developing those employees can make investment in training harder to maintain.

The report found that 84% of small employers provided training to existing staff during the previous 12 months, with more than two-thirds paying for it themselves. The average spend was £1,810 per employee.

Small businesses have an important role in developing young talent.

The report also highlights the contribution small businesses make to helping young people enter the workplace.

Four in five small businesses that had recruited apprentices during the previous three years had taken on someone aged between 16 and 24. However, employers identified a number of barriers to taking on apprentices, including employment costs, training and assessment costs, management time and paperwork.

For a smaller employer, taking on an apprentice or providing work experience can require a significant commitment of time and resources. There is also the challenge of supporting someone who is new to the workplace while maintaining the day-to-day running of the business.

Opportunity to strengthen links with education

The FSB found that 57% of small businesses had engaged with at least one part of the education, skills or welfare system during the previous three years, meaning there is already considerable engagement between small firms and education providers. However, 43% had not been involved.

The FSB is calling for greater support to help small businesses work with schools and colleges, provide work experience and recruit apprentices.

It is also calling for measures including an SME training tax credit covering 20% of accredited training costs, financial support for employers offering their first work experience placement and a national apprenticeship brokerage system to connect young people with smaller businesses.

What does this mean for your business?

For small business owners, training and development should be considered alongside the wider financial picture of the business.

Before committing to additional training, apprenticeships or recruitment, it is worth considering:

What skills does your business need now and over the next few years?
Could developing an existing employee be more cost-effective than recruiting?
What training costs can the business claim tax relief on?
Are there grants, funding or apprenticeship support schemes available?
What will the real employment cost be, including National Insurance, pension contributions and other employment costs?
How will the investment in training contribute to productivity, retention or future growth?