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Skills shortage may slow economic growth

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Over the last few years, one of the expenses that business leaders often cut back on was training and development. Combined with this, those with safe jobs tended to stay in one place for risk of compromising that security. The overall result of these two trends was an economy with diminishing pools of skilled professionals, reluctant to move and with few new employees able to take over their responsibilities when they do. 

A recent survey conducted by HSBC and The Prince’s Trust revealed that one in three employers fear the skills crisis will cause their businesses to fold, demonstrating the extent to which the problem persists in the consciousness of small businesses. A separate report by ‘big four’ accountancy firm EY found that 77 per cent of the entrepreneurs surveyed believed the skills shortage to be a considerable barrier to increasing headcount. 

While the skills shortage may be concerning, this situation may yet take a turn for the worse. Businesses struggling with cashflow and holding onto or retaining skilled employees will be susceptible to a further setback, if and when, interest rates rise.

Interest rate increases will heap pressure on people with mortgages and other debts, in turn leading them to legitimately seek pay rises to sustain the higher living costs. The knock on effect for firms will be fewer funds with which to invest in business growth if they provide those pay rises, let alone the cost to recruit new staff and retain skilled workers. As these financial pressures bite, businesses will be forced to cut costs elsewhere – and often training and development is the first to go – exaggerating the problem further. 

Fortunately, small firms are in a position where they don’t actually need to have all of their staff directly on the payroll. If businesses find that they don’t have the liquidity to retain all their key staff, it will become important to consider which staff to keep in house, and which skills can be outsourced. 

With Britain’s skills crisis in full swing, more and more businesses are rapidly attempting to gain the skills needed to maintain basic processes. In the smallest instances these skills are personal skills, but as the business size increases they quickly become skills that need to be hired in. Under the financial pressures of the post-downturn era, keeping a firm handle on costs and managing the cashflow that supports those costs is vital. 

Tracy Ewen is managing director at invoice financing firm IGF

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