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Micro business - macro problems

22 August 2011

The announcement on Wednesday last week of new Enterprise Zones may have been welcomed by many aspiring companies, but a report released on the same day by the British Chambers of Commerce (BCC) put a damper on any early celebration of this fillip for UK industry and may perhaps have given the Enterprise Zone sceptics more support for their arguments. The BCC report - The Micro Business Workforce Survey - reveals that micro businesses (those with fewer than ten employees) wanting to grow, are finding it difficult to recruit staff. In a survey of over 2,000 micro businesses, over half (55%) are looking to increase the number of staff they employ, but one in two (50%) find it difficult to recruit the right people. 

BCC policy director, Adam Marshall says micro firms make up an important part of our economy, and the fact that over half want to increase staff numbers is good news. Indeed, micro businesses are a significant force for the UK economy, generating a fifth of private sector turnover. Apart from the difficulties these companies experience in recruiting the right staff, Dr Marshall adds that, for too many firms, burdensome employment legislation deters them from taking on staff in the first place.

“Despite high levels of unemployment, many micro firms are frustrated by the quality of applicants for vacant roles," he says. "There is a real mismatch between business needs and local skills supply, with many businesses unable to find school leavers or even graduates with the right mix of skills. At a time when we need to fight hard for every new private sector job, Britain needs a skills system that delivers what businesses require. A courageous government must recognise this and put more control in the hands of employers when it comes to training the nation.”

Ann Watson, managing director of specialist awarding organisation, EAL (EMTA Awards Limited), appreciates that there is some scepticism towards the new Enterprise Zones; she is nonetheless heartened by government plans to stimulate regional growth and development. "Practical steps to drive the economy forward and make Britain attractive to foreign investment must be a priority," she says. "However, to make this a reality, firms will need two things: tangible financial benefits and a skilled workforce.

“For any firm, the key to its success is having a workforce with the necessary skills to drive the business forward.  Therefore, it is imperative that government offers practical incentives so firms can employ new staff.  SMEs are the backbone of our manufacturing industry – and the most likely to benefit from the new enterprise zones – but in these difficult times, they need financial incentives to enable them to invest in apprentices as part of their growth strategy. The government would do well, for example, to offer an NI exemption for the first 10 apprentices to help them to take on new recruits.”

Proper reward for skills?
Despite this shortage of skilled staff, one might suppose that a suitable applicant might be able to name his or her own salary or existing members of staff with itchy feet negotiate a better rate for their skills. Not so, it seems, if the Engineering Employers' Federation/JAM Recruitment (EEF/JAM) pay survey is anything to go by.

Data for the three months to the end of July show that the average pay settlement for the period was 2.7%, up from the level of 2.5% for the three months to the end of June. Whilst this is an increase on the previous period it was based on a relatively small number of settlements and shows that pay settlements are remaining at or around long term historical levels with little if any inflationary signs. The trend seen since the recovery began of most settlements being at or below 3% (around three quarters) and the number of freezes (1 in 9) continues to reflect economic realism amongst employers and employees.

JAM Recruitment's chief executive, John Morris said that while we’re still seeing market rates skewed in some areas because of acute demand for skills, the fact that pay settlements remained stable over the past month reflects a degree of economic realism on the part of manufacturers. “Employees and prospective employees may have a keen awareness of the value of their skills, but this is counterbalanced by employers’ careful attention to budgets and the strength of the sales pipeline," he says. "Apart from a few notable exceptions, we can expect the majority of settlements and salaries to remain in uneasy equilibrium for some time.”

Les Hunt

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