Small businesses are still being left behind by the skills system

In the wake of A Level and T Level results day, thousands of young people are now considering what comes next, from university and apprenticeships to their first steps into the workplace.

For small businesses, the period after results day also highlights the opportunity to bring young talent into their teams. Small firms play a vital role in helping young people get their careers started, but new research suggests barriers within the skills and training system are making it harder for many SMEs to invest in people.

Rising employment and training costs, alongside the time and paperwork involved in apprenticeships, can make it harder for smaller employers to take on and train new staff. 

Now the Federation of Small Businesses (FSB) is calling for changes to make the skills system more accessible to small businesses, a move which would ultimately help more firms bring young people into their teams, while also giving them the support needed to develop existing staff.

Training remains a challenge for small firms

Small businesses recognise the value of investing in their staff, but rising costs are making that investment harder to maintain.

The FSB’s research has found that 84% of small business employers provided training for existing staff in the past year, with 68% funding it themselves. Among businesses that paid for training, the average spend was £1,810 per employee.

But cost pressures are already forcing some firms to pull back. Almost a third (32%) have cut their training budgets because of increasing tax bills, while 27% have reduced spending because of rising labour costs.

For smaller businesses, the challenge does not appear to be a lack of appetite for training, but rather finding the money, time and support to keep investing in it as other costs rise.

More support for apprentices and training

The FSB’s report sets out a number of recommendations aimed at making skills and training more accessible to smaller businesses.

One proposal is an SME Training Tax Credit, which would cover 20% of the cost of accredited training. The FSB has also called for sector-based skills networks to help employers find suitable courses and training providers. On apprenticeships, the recommendations include better support from training providers and a national brokerage system to help pair businesses with young people locally.

These measures would, the FSB believes, help to reduce the cost and complexity of training, making it easier for small businesses to take on apprentices and invest in developing their current employees

Building better links with schools

Small businesses could undoubtedly play a bigger role in helping young people gain experience of the workplace, but the current system doesn’t always make it straightforward for them to get involved.

More than half of small firms (57%) say they have engaged with at least one part of the education, skills or welfare system in the past three years, but clearer advice and a dedicated point of contact could help more businesses understand how they can work with schools, colleges and other education providers.

The FSB has called for a simple matchmaking service to connect small firms with local schools and help arrange work experience placements. It has also proposed a one-off payment for businesses hosting their first placement, which could help to offset some of the costs of getting involved.

A system that works

With technical education high on the Government’s agenda, there is certainly an opportunity to build a skills system that better reflects the needs of both small businesses and the next generation of workers.

Getting that right would benefit more than just employers; it would give more young people the chance to gain valuable experience, develop the skills they need for the future and find their place in the world of work, while helping build the workforce the UK economy will rely on in the years ahead.

With the right support, developing talent could become a more realistic part of growth for businesses that currently feel they have to do more with less.