Bridging the skills gap to drive growth

7 in 10 businesses regard their ability to attract skilled staff as crucial to determining whether they’ll grow over the next three years, making this the single most important factor.

Against this backdrop, recruitment and retention is now the number one priority for business investment. The Spring 2022 edition of the Santander Trade Barometer shows that almost half of UK firms (45%) are planning to pump money in recruitment and retention over the coming 12 months. However, whether they’ll be able to find and keep the staff they need remains to be seen.

Labour shortages and a lack of access to skills have been recurrent themes in previous editions of the Trade Barometer, predating even the COVID-19 crisis. 

And these issues are now being felt more acutely than ever across all parts of the UK economy. The number of immigrant workers available to UK businesses has declined because of both Brexit and the travel restrictions that have been imposed during the pandemic. Though skilled workers coming to UK from Ukraine could prove to be a valuable resource.

Staffing issues could slow down growth

The ability of UK businesses to hire the workers they need is the single most important issue likely to affect growth over the next three years, Santander’s research suggests. Some 70% of businesses say that recruitment will have an important or very important impact on their ability to expand between now and 2025. This compares to 67% who say the same of the UK’s economic prospects, and 63% who cite the ongoing impact of the COVID-19 pandemic on customer demand.

It also marks an increase in concern about staffing issues since the previous edition of the Trade Barometer in autumn 2021, when 67% of businesses said staffing issues could potentially limit growth in the medium term.

Figures published by the Office for National Statistics in February showed that the number of vacancies in the UK had risen to a new record of almost 1.3 million in the first month of 2022. The figure is backed up by the latest round of Santander Trade Barometer research, where 58% of businesses say their number of vacancies over the past six months has been higher than is usual at this time of year.

Upward pressure on labour costs

Looking at businesses’ investment plans, the research reveals that almost half (45%) intend to spend money on recruitment over the next 12 months. A higher proportion than in any other area of investment, including product development (30%), new equipment (28%) or domestic expansion (24%).

However, rising labour costs are likely to affect businesses’ ability to attract the skills they need and businesses are increasingly reporting higher wage bills. 46% say that starting salaries have risen significantly since last autumn.

Businesses are more likely than not to blame Brexit for labour shortages. 46% report that the UK’s departure from the European Union has been responsible for staffing issues in recent months, although 32% say this has not been their experience.

There are also signs in the Trade Barometer that businesses are responding to skills shortages by seeking technological solutions. Of the technologies businesses plan to invest in over the next three years, the most popular is automation, cited by 30%. This could involve using software to automate repetitive tasks, as well as the use of robotics to take over certain manual processes. The same proportion said they plan to invest in cybersecurity between now and 2025. 

Skills challenges in international markets

The Spring 2022 Trade Barometer highlights the importance of international growth for helping UK businesses sustain their post-pandemic recovery. But again, skills are likely to be a crucial factor in driving international expansion.

Among businesses which already operate in overseas markets, 26% say that access to the skills needed to address the challenges associated with international trade is a key challenge. Of these businesses, more than half (53%) say they need staff to help them deal with red tape such as export documentation or product regulations.

Meanwhile, for businesses which do not yet trade in foreign markets, a shortage of skills is a major impediment to doing so. With 40% of such businesses saying that a lack of managerial time has been a significant barrier to overseas expansion in the past three years, while almost as many (39%) point to a lack of staff with the required expertise.

Skills issues are seen as greater obstacles than transport costs (38%) or the ability to get the right market information (35%). But these findings uncover a major opportunity for key partners to support businesses’ global ambitions, by providing them with the insight, expertise and contacts they need to get their international trading plans off the ground.

How we can help

Santander has a team of sector experts, who work with businesses to provide both financial and non-financial solutions tailored to businesses in their respective sectors. The team understand the different challenges that businesses in their sectors are facing and work with their own ecosystem of specialists to support businesses in overcoming these challenges. Our sector experts also work closely with our international specialists to enable us to help businesses with both their domestic and international growth. As well as our sector expertise, our relationship teams across the UK are able to assist businesses with a range of solutions to help realise their growth ambitions, whether that’s in the UK or in overseas markets. This wealth of expertise will soon be available all in one place via the upcoming Santander Navigator platform. The platform will bring together ecosystem providers, events, market insights and more, all digitised in one platform and tailored to specific businesses, sectors, and functions.

If you need any help, please contact us on: international@santander.co.uk

For more information, please read the full Trade Barometer report