Fears of stagflation, where economic inertia interlocks with higher inflation, will set economic warning bells ringing, with the release of a new survey from skills charity Enginuity. (Mind The Gap Report)
Nearly 80% of Small and Medium Enterprises (SMEs) in the UK are under pressure to increase prices due to escalating costs of labour and raw material, the ‘snapshot’ has revealed.
For the first time since the regular snapshot survey was instigated, most SMEs, almost three-quarters, plan to offset these rising costs by passing them on to customers.
In another blow to the Government’s growth ambitions, two-thirds of SMEs are not operating at full capacity for the second consecutive year.
With the Milburn Commission, due to deliver its findings on cracking the conundrum of more than a million young people not in education, employment or training (NEETs) and Government announcing an extension of work experience and skills training to 14–16-year-olds, with changes to the school curriculum and the introduction of new vocational qualifications skills seems higher on the political agenda as ever.
Enginuity, the charity tasked with helping to close the skills gap, calculates that the UK’s engineering and manufacturing sectors fail to optimise production and are losing out on around £5.2 billion of revenue per year, due to skills-related challenges.
Less than 40% of respondents reported confidence in the next three to five years, although financial constraints remain the most significant barrier to investing in skills development.
Ann Watson MBE, CEO of Enginuity, believes that the survey shows just how SMEs are being restricted in terms of achieving their full potential.
“SMEs are telling us that they are at their limit and cannot hold back prices any longer whilst at the same time, they are not able to achieve maximum production.
“The Chancellor needs to take heed as he prepares for the budget – and find a way of ensuring that small and medium sized enterprises, which make up more than 90% of the manufacturing sector, can afford to take on extra personnel.
“Likewise, with employer confidence in recruitment persistently lagging their confidence in training, Alan Milburn’s final recommendations must consider what is holding employers back from recruiting if they are to succeed in creating more opportunities for young people.
“We have already highlighted that skills-related challenges cost the engineering and manufacturing sector £5.2 billion a year.
“Reducing skills-related challenges is imperative if we are to have a fighting chance of improving economic growth in this country.”
The report also highlights a disconnect between policy initiatives and their impact on SMEs, with almost two-thirds of SMEs not fully understanding the available Government support for skills and only 10% believe the new apprenticeship units will effectively address current skills gaps.