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SMEs turn to apprenticeships to fill skills gap

This is according to a new report launched by Albion Ventures, one of the largest independent venture capital investors in the UK.

The 2014 Albion Ventures Growth report, which examines the challenges and opportunities faced by 450 small and medium sized businesses (SMEs) with a combined turnover of over &pound1.6 billion, shows that a third (32%) of firms feel that they lack expertise in key areas. One in ten (9%) SMEs believe that a lack of management expertise is a significant barrier to growth and a further 9% said that a lack of business mentoring is a threat to the growth of their company.

This lack of investment in skills cannot be solely placed at the feet of government. Businesses admitted that they themselves are most likely to focus their training resources on skilled staff, with two in five (39%) committed to this compared to only 27% who plan to train and develop semi-skilled staff and 14% for low-skilled and low paid staff.

Interestingly, the number of firms who lack core skills inversely correlates with company size as firms develop the personnel they need as they grow. While smaller businesses appear content with their skills base, & lsquo;threshold’ businesses – with turnovers of between &pound500,000 and &pound1 million – recognise the need to bring in more skills in order to take that next step, with more than half (53%) recognising that they lack the required skills in key areas.

The report also highlights that staff retention is cited as one of the biggest challenges for organisations, with those businesses looking to grow eager to develop ways by which they are able to identify and retain the strongest team.

In order to combat this skills shortage, the Albion Growth Report reveals that UK SMEs are increasingly looking to apprenticeships. While the report revealed that only a minority (12%) of SMEs currently have an apprentice scheme in place, a further 23% are considering launching one in the future, and only 1% of firms are currently running a scheme that they will terminate.

The attraction of apprenticeships appears to be primarily financially motivated in the shape of reducing staffing costs, but also many SMEs see it as a chance to highlight their Corporate Social Responsibility credentials (44%) by investing in the local community. The tax incentives offered by the government also appear to be boosting take-up for schemes, with this cited as a key reason by 38% of firms who employ apprentices.

The Report by Albion Ventures shows that the value of apprenticeship schemes is much more apparent to & lsquo;optimists’ than & lsquo;pessimists’ – over three times as many & lsquo;optimists’ (14%) run schemes as & lsquo;pessimists’ (4%).  More than two in three & lsquo;pessimists’ (69%) say they would not consider running an apprentice scheme in the future.

Patrick Reeve, managing partner at Albion Ventures, said, “While there has certainly been progress made in the past year, it is clear that businesses still feel that their potential for growth is being hampered. Our research reveals that those & lsquo;threshold’ businesses, who are on the cusp of taking a significant step forward, continue to be undermined by a lack of skilled staff. If we want UK SMEs to continue to drive the UK economy forward, we need to ensure that they have all the tools that they require to succeed.”

Emran Mian Director of Social Market Foundationsaid: “While it is a welcome boost that apprenticeships are becoming increasingly popular, it is imperative that we actively look to help those businesses, whose growth is being held back by a dearth of key skills, take the next step.”

Taking a look at ways by which the government could boost the pick-up of apprenticeships, 14% of SMEs said that they would be more likely to consider taking on an apprentice as a result of the Government’s relief on national insurance contributions for employees under 21, but this rises to 34% for SMEs with more than 50 employees. 


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