Staff and skills shortages could derail growth of mid-sized businesses

• War for talent intensifies with almost a third of businesses viewing new hires as a key way to drive growth
• Skills shortages loom as 40% of businesses struggle to find workers with the right skills, and almost a third of companies concerned by shortage of overseas workers

Medium-sized businesses across the UK are planning a hiring spree to drive growth as 60% expect to return to pre-pandemic revenues within the next 12 months, according to new research by accountancy and business advisory firm, BDO.

The bi-monthly survey of 500 leaders of medium-sized businesses reveals almost a third (32%) will need to make new hires this year to support their growth, rising to 43% of companies with an annual turnover between £10m and £50m.

However, a shortage of workers and rising employment costs risk hampering this growth with two fifths (40%) of business worried about finding employees with the right skills. More than a third (35%) report a lack of workers able to work the hours that the business requires, rising to 40% for the retail and wholesale sector. 

Despite the Government’s focus on apprenticeships to combat the so-called skills-gap, almost a third (31%) of businesses cited a shortage of apprentices as an issue affecting their hiring.

Two years on from Brexit, almost a third (32%) of businesses are concerned by a shortage of overseas workers – a particular worry in the North East (45%) and North West (33%). This is leading to an increased focus on hiring domestically, with a quarter (25%) of businesses saying they will rely on a greater proportion of domestic hires this year.

Businesses are improving their offer to employees in a bid to overcome these challenges. Almost a quarter (23%) say they will introduce new perks to attract and retain staff this year, while more than a fifth (21%) will be more flexible in their working practices moving forward.

However, these talent shortages coupled with rising inflation and the upcoming increase in National Insurance payments mean the cost of hiring is set to rise rapidly. 16% of businesses report paying employees more to keep up with inflation, with a further 17% doing so to attract and retain staff. Almost a third of firms (30%) also reported that they plan to increase the price of their goods or services in order to drive growth.

Ed Dwan, partner at BDO commented:

“While many businesses are optimistic about recovery this year, it is not guaranteed. With significant concerns about staff shortages on the one hand and rising costs of hiring on the other, the National Insurance hike in April could prove a tipping point for medium-sized businesses - the engine of the UK’s economy. 

“The struggle almost a third of businesses are facing when trying to find apprentices is also deeply concerning. As organisations try to plan for the future, more should be done to encourage talented workers down this route and create a thriving workforce for the years ahead, whilst also supporting better social mobility.”