Skills shortages threaten business recovery
Businesses struggling to recruit and retain staff warn their growth is at risk, both at home and in international markets.
Our Spring 2023 Trade Barometer warns that the ability of UK businesses to overcome a tough economic outlook and challenging trading conditions is threatened by severe skills shortages and tough competition for talent. The figures suggest the recruitment and retention problems faced by businesses looking to international markets for diversification and opportunity are particularly acute, potentially undermining their efforts to increase overseas sales.
In our research, based on more than 1,000 businesses from across the UK, 7 in 10 (70%) cited concerns about their ability to attract the workers they need. The high number underlines the extent to which problems in the UK’s labour market are acting as a brake on growth.
Analysis by the Institute for Employment Studies suggests the UK is trailing behind almost all rich nations in its post-pandemic labour market recovery and is now the only major developed country with employment below pre-pandemic levels. The difficulties reflect a combination of factors. This includes an increase in the number of people taking early retirement, rising long-term illness rates and lower migration. As a result, the UK is now home to 600,000 more people not participating in the jobs market compared to 2019. (Source: IES News ‘November labour market statistics).
Fighting for talent
Against this backdrop, recruitment, retention and retraining has become the top priority for businesses as they focus on their investment plans for the year ahead. Our Spring 2023 Trade Barometer shows that 46% of firms plan to invest in hiring new staff, with 40% expecting to invest in staff training.
However, the battle for talent is fiercer than ever. More than half of UK businesses (54%) say they have more vacancies today than 6 months ago. And 56% say they’ve had to raise starting salaries in order to attract new recruits. And while the problem is an international one, with many Western economies reporting skills shortages in the wake of the COVID-19 pandemic, the UK’s departure from the European Union appears to be causing particular problems. 47% of businesses say Brexit has added to their issues with staff shortages.
International growth threatened
The worry now is that such concerns inhibit businesses’ ability to grow – particularly as they target international expansion. In this context, it’s concerning that businesses currently aspiring to sell overseas for the first time are more likely to be troubled by labour market issues than their counterparts. 60% of these businesses complain about rising vacancy rates, while 56% have suffered Brexit-related staff shortages.
Indeed, among businesses already selling overseas, 33% regard the difficulty of finding skilled workers as a constraint on their growth plans. A lack of key talent, therefore, represents the most significant hurdle for businesses hoping that international expansion can compensate for slower expected growth at home.
In practice, these skills issues are affecting both the core business and efforts to step up international trade. It’s not just that the tight labour market is having a negative impact on the extent to which businesses can scale up as they win new customers, concerning though this is. But also that the skills needed to support international trade are in short supply. For example, 57% of businesses say they’re struggling with a lack of expertise in dealing with red tape such as customs processes, while 31% need to recruit people with experience of managing cross-border sales.
Other areas where skills shortages are biting include sales and marketing, where 42% of businesses point to concerns, and sustainability, an issue for 17%. The first of these two shortfalls may act as a brake on businesses’ ability to bring in new customers. The latter is concerning given the growing focus of many businesses on climate-change mitigation and decarbonisation.
The talent issue also threatens to hold back businesses that might consider selling to overseas customers in the future. Broadly similar difficulties are hitting businesses that currently serve only the domestic UK market. More than a third (35%) say that shortages of skilled labour represent a barrier to the internationalisation of their businesses.
Resolving these issues must now be a pressing priority for businesses, as well as policymakers, business groups and advisers. While many businesses in our latest Trade Barometer research report increasing optimism about their prospects of growth over the next 12 months, those hopes may be dashed if difficulties with recruitment and retention persist.
How we can help
In light of these challenges, we’re working hard to make sure our clients have the tools and support they need to identify new talent and invest in upskilling existing talent.
With Santander Navigator, your management team can save valuable time and money when investing in new skills, which can often feel like a luxury. With the help of our training workshops and courses, you can train existing employees to have the necessary skillsets for the future. You'll also be able to identify and onboard new talent on a temporary or permanent basis via our Unibeez partnership. That way, you don't have to rely on just one employee—you can scale as you grow internationally.
We’ve also created the SME Support Toolkit. With this toolkit, you'll have access to tools for developing your workforce, business coaching and mentoring, and the means to transform your people management.
By investing in these tools, you'll be able to deal with the new risks and challenges your business is facing while also helping identify new opportunities. For more information on the SME Support Toolkit visit https://go.pardot.santander.co.uk/SME-Support-Toolkit