UK entrepreneurs see bright future, but looming skills shortage poses serious threat to their growth
EY’s data shows that 83% of entrepreneurs have increased their headcount with over a quarter (28%) of these businesses creating more than 50 new jobs. The EY survey also revealed that the vast majority of entrepreneurs (93%) expect their turnover to increase in the next three years. However, just 23% feel that they are able to attract the right talent, suggesting that there is a ticking bomb in their business plans for firm growth.
EY surveyed 226 entrepreneurs to assess how their firms have performed in recent years and whether they expect to grow in the future, as well as to gather their views on the factors that they feel can help or hinder growth. Nearly all of the entrepreneurs surveyed, across multiple sectors and regions of the UK, have well-established businesses 73% of respondents have run their business for at least a decade.
The growth of entrepreneurial businesses
EY found that three quarters of entrepreneurial businesses (75%) have seen growth in their turnover in the last year with over half (57%) witnessing a turnover increase of more than 5%. Looking ahead, over the next three years, all of the entrepreneurs surveyed expect their business to grow further, with over half (56%) expecting annual growth of over 10%. This view was especially prevalent in the pharmaceutical industry, where all of the respondents expect growth of more than 10%.
Stuart Watson, EY’s Entrepreneur of The Year UK Leader, comments: “Over the past 12 months the UK’s economy has strengthened, and this is reflected in the confident mood amongst these businesses. Entrepreneurs have been recruiting in significant numbers and seeing reasonable growth over the past year. But more importantly more than half are planning ahead for double digit growth. Britain is open for business and the UK’s entrepreneurs are leading the way in terms of increasing their turnover and their headcount.”
When asked about the one thing the next Government could do to make growing a business easier, over a quarter of entrepreneurs (29%) cited cutting red tape and a fifth (20%) cutting business taxes. In the South East and West of England over a third of businesses (35%) cited cutting red tape as the number one thing the next Government could do to make growing a business easier. In contrast, a quarter of Scottish entrepreneurs opted for a cut in business taxes.
Skills shortage puts growth plans at risk
Despite the fact that UK entrepreneurs have firm plans to grow their businesses over the next year, the EY survey suggests that they may come up against a skills shortage. More than three quarters (77%) of entrepreneurs admitted that they struggle to attract the right talent with over half (54%) saying that this is down to a lack of the right skills and a fifth (20%) stating that this was due to wage costs being too high.
EY found that businesses in the South East and South West are having the most trouble attracting talent with 63% citing a lack of skills as the core reason. In London the war for talent becomes more difficult with more than a quarter (26%) of entrepreneurs responding that they are having trouble attracting talent due to wages being too high, closely followed by too much competition (22%).
Stuart continues: “Overall the future looks bright for UK entrepreneurs, with many delivering strong performance in recent years, and expecting good times ahead. However, our survey highlights that while businesses are increasing headcount at a considerable rate and are expecting to grow even more over the next year, the right people may not be there to fuel that growth.
“For entrepreneurs to sustain their growth plans, they need to demonstrate fresh thinking and an innovative approach to attracting talent from a global pool. This will help them stay ahead of the curve as the economy recovers and the war for talent intensifies.”