Fears of stagflation, where economic inertia interlocks with higher inflation, is likely to set economic warning bells ringing when a new survey from skills charity Enginuity is released.
Nearly 80 per cent of Small and Medium sized businesses are under pressure to increase prices due to escalating costs of labour and raw material, their snapshot findings have revealed.
For the first time since the regular survey was instigated, almost three-quarters of SMEs plan to offset these rising costs by passing them on to customers.
And in another blow to the Government’s growth ambitions, two-thirds 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 and the Government announcing an extension of work experience and skills training to 14–16-year-olds, the issue of skills seems higher on the political agenda than ever.
Watson: Chancellor needs to take heed as he prepares for the budget
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 per cent of companies surveyed reported confidence in the next three to five years, although financial constraints remain the most significant barrier to investing in skills development.
Ann Watson, 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 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 per cent believe the new apprenticeship units will effectively address current skills gaps.
