In the past year, the business environment that UK SMEs operate in has undergone some significant changes. Political uncertainty, the weakening pound, the first rate hike in a decade, and the looming prospect of Brexit are impacting how businesses behave, and how they prepare for the future. In 2017, businesses have shown that their recruitment strategies are changing to deal with new personnel challenges that are already having an impact, and that only promise to become more pronounced in the coming years.
Businesses are facing skill shortages
According to the Albion Growth Report 2017, 65 per cent of UK businesses believe their business lacks expertise. While many industries need more labour, 74 per cent of media and marketing firms, 72 per cent of manufacturers, and 67 per cent of IT and telecommunications businesses indicate that they need access to more skilled labour. This is also reflected in the figures showing which professions are most sought after:
● 26 per cent of businesses don’t have the marketing talent they need
● 19 per cent need more skilled workers to aid in business planning
● 17 per cent need better or additional IT talent
● 17 per cent are short on skilled software developers.
Brexit is driving a British brain drain
In a 2017 study by Baker Mckenzie, a full 56 per cent of skilled EU nationals working in the UK rated themselves as “highly likely” or “quite likely” to leave the UK, even before the outcome of Brexit negotiations is known. As Brexit approaches and negotiations continue on their current trajectory, this figure is only likely to increase.
Currently, 2.15 million EU nationals are actively working in the country, making up about 7 per cent of the country’s full-time workforce. At the same time the EU and European businesses are making moves to attract skilled British workers, and to retain those that are currently working in EU countries. The projected end result is a significant reduction in the total size of the UK’s labour pool, with a heavy emphasis on skilled workers.
SMEs are forced to adapt
Business owners are already feeling the pressure caused by this issue, and are finding ways to adapt. However, only a third of businesses are currently hiring new employees. Instead, 15 per cent have actually reduced recruitment resources, while 10 per cent have changed their recruitment strategies, and 9 per cent have made redundancies. How businesses react to their own skill shortages depends strongly on their particular situation. Businesses that desperately need an expert, for example, need different solutions than those that they currently employ, and need to find a way to retain, skilled EU citizens.
Over the past year, EU citizens have consistently cited a feeling of being unsupported by their UK employers as a major reason for their departure. Businesses that are already facing a shortage can’t afford to lose valuable employees. For them, it may be more important to divert resources to learn about, and address these concerns to retain workers. That may mean providing better compensation, addressing a company culture issue, or helping to manage other professional concerns.
Finding labour abroad
Currently, UK businesses are having a difficult time attracting talent internationally. Most likely this is because workers, particularly Europeans, are now less willing to pack up their lives and move to a new country without any assurance that they won’t simply be forced to leave again a year later. While some businesses are trying to deal with this by making more attractive offers, others are hoping to make do by hiring remote workers abroad.
Growing competition is on the horizon
While businesses are certainly seeking creative solutions to the growing skill shortage, it won’t ultimately change the fact that UK businesses will be increasingly competing for a smaller number of workers. This is only exacerbated by the fact that the UK economy is still growing due to rising foreign investment. SMEs that are hoping to take advantage of this economic growth to expand their own operations will need to work hard to get access to the labour they need.
The personnel challenges faced by British businesses are only one piece of a much larger puzzle. As Brexit talks progress, and the final date approaches, business owners are facing new challenges and new, unique opportunities. How they manage the rapidly changing business environment in the coming year will determine which SMEs thrive and grow to become Britain’s new industry leaders, and which will be left behind.