High labour costs and skills shortages holding back UK industry growth, report claims

High employment costs are now outstripping energy costs as the most cited source of pressure to raise industry prices, threatening the competitiveness of the UK labour market, Enginuity's latest research has found. 

The report - based on interviews with 135 SMEs - also identifies skills shortages as a major obstacle to business growth, causing SMEs to hold back on investment. The vast majority of companies (80 per cent) that engaged in the research said they had experienced 'difficulties' finding suitable staff during recruitment in the last six months. 

Only 24 per cent said that labour and skills shortages have not affected their business, whilst 41 per cent of respondents said that they have been unable to grow and respond to new business opportunities despite demand.   

Despite these challenges, employers taking part in the research remain optimistic about the year ahead, and welcome the UK Government’s recently published Industrial Strategy, which has provided a strategic 10-year vision for business and demonstrates the it’s commitment to kickstarting economic growth.

In addition, 80 per cent of SME respondents said they expect their workforce to remain constant or increase over the next six months, and 31 per cent expect their investment in training to increase in the next 12 months.   

In a statement, the report’s author and Enginuity’s Policy Manager, Poppy Bramford, said: “This report is a striking confirmation of how severely the skills system is failing the majority of engineering and manufacturing SMEs, stifling their ability to grow. Despite significant increases to employment costs, SMEs remain determined to keep investing in training.  

“Whilst the Government wants to see increases to employer investment in skills, barriers keep SMEs locked out of the skills system that would enable them to do so. For SMEs to realise the ambitions of the UK Government on economic growth, the skills landscape must move beyond policy chop and change by injecting longevity and SME engagement into policy creation.”