Skills shortage holds back small businesses

A lack of management ability among small business owners and a shortage of skills among the workers they are seeking to employ may be holding back the growth of this sector of the economy, according to research by Barclays Bank published today.

The report, Bridging the Skills Gap, reveals that, although 57 per cent of small businesses between three and ten years old plan to grow over the next two years, many may fail to fulfil their potential because of the absence of appropriate skills.

The small business sector is increasingly being hailed as a source of strength within the economy. But, Barclays says, only 4 per cent of all businesses in Britain have an annual turnover of more than pounds 1m and only 11 per cent export.

Owners of small businesses rely heavily on the experience gained in previous employment, according to the research, which covered a nationally representative sample of 600 firms. Only 19 per cent of owners had any specific sales or marketing skills and just 14 per cent had financial skills.

Moreover, the importance of day-to-day problems in restricting growth is demonstrated by 54 per cent of owners saying lack of time was the biggest management constraint on future expansion.

But despite these weaknesses - and 69 per cent of owners believing that training was important to future success, only 23 per cent of small businesses invested in training during their first three years of trading.

Those that did train tended to focus on activities specific to their sector rather than on general management.

The management problems are compounded by the difficulties these businesses have in attracting skilled workers. Just under half of small businesses would like to increase their staff in the next two years, but a third report that finding the right people is the biggest barrier to this.

Barclays says that if small businesses' survival and growth rates are to be improved, it is vital that owners seek and use more advice and training. The bank - which claims to be in the forefront of recent initiatives to encourage training - says that reluctance to take this route can be overcome by building a close partnership between businesses, banks and providers of advice.

David Lavarack, the bank's head of small business services, said: 'In an increasingly competitive economy, being able to stay one step ahead of the competition is not just a prerequisite for survival, but essential for growth. Small businesses, with limited financial resources, have to rely heavily on the quality of their people to differentiate themselves.

Maintaining this advantage can only be achieved through a commitment to continual training and advice.'