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Small firms are getting left behind in the digital industrial revolution

13 December 2017

Small companies need help to keep up with the digital industrial revolution, says FSB.

Some companies in the stone industry have embraced the digital connectivity of Industry 4.0. Some haven't and it is holding them back. The fact that some (mostly small) companies are not up to speed with technology is one of the reasons productivity in the UK lags so far behind that of other developed countries, says the Federation of Small Businesses (FSB).

The Federation says productivity growth in the UK will continue to stall unless government helps small firms, where the digital defecit is most accute.

New research from the FSB shows more than a quarter (26%) of business owners in England lack confidence in their basic digital skills and 22% believe a lack of basic digital skills among their staff is holding them back from increasing their digital and online presence.

FSB warns that small firms will be left behind unless the National Retraining Scheme, announced in the Budget in November to boost digital capability, is designed with them in mind.

Despite clear evidence that better digital capability spurs growth, 25% of the small firms surveyed did not even consider digital skills to be important to the growth of their business. That is why FSB believes demonstrating the benefits of digital connectivity to these firms is critical.

Mike Cherry, FSB National Chairman, says: "We know that embracing digital technology can help businesses in every sector to be more productive. Firms risk being left behind unless they have the skills to take advantage of technology to remain competitive and responsive to their customers.

“We need to highlight the benefits of going digital and then make sure that small businesses and their staff can access basic digital skills training that meets their needs through initiatives like the National Retraining Scheme. If we can harness the digital potential of small firms, we stand a real chance of creating more world-beating businesses and boosting growth."

The digital skills gap is part of a wider skills challenge hitting small firms, says the Federation.

The research finds 30% of small businesses in England that have tried to recruit in the year since the Brexit vote have struggled to find the skills needed to fill vacancies. Skilled trades are most affected as the labour market remains tightly squeezed. 46% of small firms report a lack of necessary skills among the people they employ.

Mike Cherry: "Productivity is being hampered by nagging skills shortages that are making recruitment a nightmare for small firms. As the UK moves towards Brexit, a technical skills black hole threatens the economy. Small firms also tell us that technical skills are crucial to the future growth of their businesses. The clock is ticking to tackle the ever-widening skills gap."

49% of firms in the FSB survey said they had no formal training plan or budget and 75% of those who are self-employed had no plan or budget to support training. 

FSB believes a strategic approach to training is essential to support small business growth aspirations, so small businesses must know where to turn for help on this. Small firms say the main barriers to training are the fact that their staff are too busy (25%), training is too expensive (21%) or the type of training desired is not available locally (16%).

Mike Cherry: "The twin pressures of rapid technological change and Brexit make upskilling the current workforce more important than ever. Small firms clearly recognise the value of providing training for themselves and their staff, but it can be a struggle to find the time and money, and in some cases even to find the right training locally. All Local Enterprise Partnerships (LEPs) should ensure that there is relevant, accessible training available to meet the needs of small businesses and the self-employed.

"What’s more, there’s a bigger problem with training among the self-employed who often find themselves so stretched that extra time away from the business can seem more like a burden than a benefit. The Government should encourage more people to train by offering tax breaks to self-employed who attend training to develop new skills, not just to refresh existing skills."


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