British SMEs are optimistic of increasing sales in the coming months, according to the recent SME Confidence Tracker from invoice finance experts Bibby Financial Services (BFS). However, the research also revealed that concern remains among SMEs over how an EU exit would shape their country’s economic climate. Looking ahead, what are the potential implications for UK SMEs?
In requests made to Chancellor George Osborne ahead of his 8th of July Budget statement, the Federation of Small Businesses (FSB) expressed concerns about a perceived skills shortage in the UK workforce.
Ready for growth
The FSB’s latest research shows that small business productivity grew by 1.4% in Q4 2014, a figure that dwarfs the UK average of 0.3% and has sparked small businesses to gear up for growth.
According to the latest CIPD/Hays resourcing and talent planning survey, 44% of companies plan to increase their staff in 2015. However, if they are to meet their goals and find suitable hires, the FSB believes that more must be done to address a skills shortage.
Finding and building skills
The suggestions made by the FSB focused on two key areas. Firstly, promoting the message to schools and young people that apprenticeships are valuable. This forms part of the broader belief that a vocational training system which effectively prepares young people for work is crucial.
Secondly, putting greater emphasis on developing leadership and management skills. The FSB identifies this as an area “where the UK lags behind its competitors”, and calls for a management component in proposed ‘degree apprenticeships’.
Affecting business strategies
The CIPD has suggested that focusing on developing existing staff would be a better strategy for building a skilled and sustainable workforce in the long-term, but this strategy requires significant investment and comes with a certain amount of risk.
PwC’s 2015 global CEO survey shows that 75% of the 1,300 chief executives surveyed believe that finding the right staff is a ‘major concern’. That’s 10% more than last year and 46% more than six years ago. Worse still for small businesses, it seems that mergers and acquisitions are increasingly being driven by the need to buy in talent. Around 25% of deals last year were motivated by the desire to bring the right skills on board.
This means small businesses not only have to worry about acquiring talent, but retaining staff: a problem 77% of businesses admit to struggling with. Solving the skills shortage is therefore not just about fuelling growth, it’s about maintaining stability.
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For once a General Election may not be entirely focused on politically-loaded issues, because the major parties are finally recognising the importance of Britain's SMEs to economic growth.
With the latest polls suggesting the Tories have only a narrow lead, it's hard to see anything but a minority government taking control of Westminster after the election, so another coalition can't be ruled out. Although this may yet mean much shuffling, compromising and the occasional disappointment, there appears to be cross-party support for many pro SME policies.
Devolution and regional development are set to be key issues. The Lib Dems have already promised local councils Devolution on Demand, and while Labour and the Conservatives will be cautious of how they promise any shift of power to the home nations, both major parties have made commitments to transfer power, and significant budgets, to cities in the North. What may factor into how devolution progresses, and where the main debates head after the election, is how much support the SNP and Plaid Cymru receive.
Regulation and rates
The good news is that the coalition's 'one-in, one-out' rule for new business regulation looks set to continue, with Labour in support of maintaining this approach. The Conservatives are even going one step further, pledging to introduce a deregulation bill to cut health and safety requirements, and a new rule requiring government departments to justify new regulations with a double cost saving.
Both Conservative and Labour are also promising to clamp down on late payment practices by FTSE 250 (Con) or 350 (Lab) companies, as are the SNP. Finally, Labour promise to cut business rates in 2015 and freeze them in 2016; while the Lib Dems and Conservatives only promise a review.
Funding and support
The Small Business, Employment & Enterprise Act is already set to create "challenger banks", and an online database of alternative funding to help SMEs refused a loan by the Big Ten banks. Both the Conservatives and Lib Dems have pledged to continue this path and expand access to lending. Labour are expected to continue to expand the British Business Bank and set up a Small Business Administration similar to the US body, which supports small business growth.
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