Economic crisis leads to a significant hiring freeze amongst UK SMEs

2022 has seen businesses face unimaginable challenges.

Economic crisis leads to a significant hiring freeze amongst UK SMEs

2022 has seen businesses face unimaginable challenges. Alongside carrying the weight of the pressures of the pandemic, SMEs have been at the mercy of increasing interest rates, extremely high inflation and an energy crisis, all of which has significantly hindered their growth and success. As a result of this a number of UK SMEs have put many initiatives and plans on the backburner including hiring new talent.

While the decision to halt hiring may help to ease the pressures stacked against SMEs in the short term, it could work against the successes of SMEs in the longer term. The government needs to provide certainty for businesses and make it easy for them to navigate what is available. This will help ease the strain while also incentivising businesses to take advantage of government resources available to them. 

SME hiring freeze 

According to our recent research, the number of UK SMEs planning to hire new staff in the next year has dropped from 37% in March, to 12% in July – a remarkable change. While it’s understandable that businesses will be making cutbacks at this unprecedented time it’s crucial that this doesn’t remain de-prioritised. New talent provides numerous opportunities for innovation in businesses which allows firms to remain competitive, an aspect that is key to ensuring businesses can bounce back from the current economic crisis. 

However, aside from the many discussed pressures, another factor at play is the lack of available talent. This long-standing skill shortage has only been exacerbated by the pandemic and has had a knock on effect on company performance and profitability. It’s vital that the government has plans in place to help businesses navigate this tumultuous period and lack of available skills or we risk losing a critical piece of our economy. 

Resources to be considered 

While each businesses’ needs are different and complex, growth and innovation can, in part, be accomplished through the prioritising of new talent. Discovering and training these new talents is vital to the growth of these businesses, and there are several government schemes/resources that can assist with this process. 

The Apprenticeship Levy, for instance, provides funding to encourage businesses to invest in and create apprenticeships. Apprenticeships, rather than only higher education degrees, allow individuals from a variety of backgrounds to gain entry into skilled professions. Apprenticeships can widen the pool of talent which SMEs are hiring from and can be a great way of educating a new joiner on the business functions. However, our research also shows that over half (54%) of SMEs do not currently use the scheme. 

While the opportunity with apprenticeships is vast, we believe that unnecessary complexity has been brought into the delivery system that impacts businesses and providers. We’ve called on the government to review apprenticeship funding bands to ensure they keep pace with inflation.  Both businesses and providers tell us that it is difficult to maintain good quality provision, which both want, under a fixed cap system when all other costs are rising. 

Appropriate and effective careers guidance, both for young people looking to enter the labour market and those transitioning to a new job or new career, is critical. Too often the support available is not clearly signposted for users and lacks up-to-date, local labour market data. We are particularly concerned by the inconsistent information and support available to individuals considering vocational routes, such as apprenticeships. A re-direction of levelling up resources to support a programme of ‘educating the educators’, to ensure advisors have the right information and resources to support those considering a range of progression pathways. 

Government therefore must work with all businesses, in particular, to enable them to access, train and support new starters with their businesses to stimulate their business growth and their contribution to economic growth. 

Glenn Collins
Glenn Collins

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