Growth glimmers from SMEs as they adapt recruitment approach to counter cost-of-living pressure

A new report into the skills and recruitment challenges of small and medium-sized enterprises (SMEs) reveals that businesses plan to invest in their workforces by upskilling and recruiting through technical education, to plug skills gaps and meet ambitious growth plans in light of the cost-of-living pressures.  

Now in its second year, The Skills Horizon 2024 Barometer, launched by the Skills for Life campaign in partnership with the British Chambers of Commerce, found that SMEs are adapting to continue investing in talent amidst a challenging economic climate. 

Over half of SMEs agree that the top concern for the year ahead is increased running costs (51%), with many also concerned about staff wellbeing linked to the cost of living (41%).

This has prompted two thirds of businesses to consider investing in low-cost but longer-term workforce recruitment tactics such as school leaver employment schemes (53% in 2024 vs 50.9% in 2023) and offering work placements (60% in 2024 vs 55.2% in 2023).

“Having the flexibility to upskill people on the job means we can focus on hiring people with the right attitude for the business, and then provide training to develop more technical skills,” says Steve Young, apprenticeship supervisor at North York Moors National Park Authority.

“When it comes to recruitment, there aren’t enough people in the local area with the skills we need. To help meet our business demands, in 2024 we are going to continue with our apprenticeship programmes and upskill the wider workforce in leadership and project management skills.”

SMEs consider the top benefits of these technical education options to be the opportunity to shape young talent (55%), the ability to upskill existing team members (52%), and to address skills gaps in the business (50%). 

Seven in 10 SMEs (71%) are looking to take an introspective approach by investing in their current workforce – a 4% increase on last year – with 3 in 5 (60%) considering offering training and employment schemes for existing employees to help plug skills gaps they foresee in the year ahead. 

Reflective of the change in approach, are the current top skills SME employers are looking for in job candidates. ‘A particular level of qualification’ might have once been a non-negotiable on most job descriptions, but it is now at the bottom of the agenda (14%).

Instead, employers are open to more routes and seeking attributes that enable employees to thrive in a fast-paced environment. The top traits employers will look for in 2024 are ‘a good work ethic’ (38% of employers agree),’ a team player’ (37%) and ‘a quick learner’ (31%). 

“Investing in a skilled and diverse workforce makes good business sense and is crucial to addressing the economic challenges and opportunities that lie ahead,” says Jane Gratton, deputy director for Public Policy at the British Chambers of Commerce.

“While experience and qualifications are valued at recruitment, businesses are increasingly looking to develop their workforce on the job.”

Reassuringly, diversity, equity and inclusion also remain crucial for employers, with 2 in 5 (40%) hoping new talent recruited in 2024 will help diversify the workforce ahead of 2025 – this is up from 30% in 2023. 

Despite the financial challenges highlighted by SMEs, there is optimism for the year ahead as a high majority (86%) of businesses plan to grow revenue in 2024, a 3% increase from last year. On average, SMEs expect to grow 26.43% in the next year and recession fears are down on last year’s report (16% in 2024 vs 26% in 2023). 

These ambitious targets may well be reflective of the advantage SMEs feel they have with nearly three quarters (73%) believing they can be more agile than larger businesses when it comes to recruitment and upskilling their workforce.

This ability to be nimble in their approach has already helped SMEs when it comes to setting up technical education routes and reaping rewards. Over the past year nearly three quarters (74%) reported seeing other businesses benefit from the available schemes. 

The latest findings from the Skills Horizon Barometer coincide with National Apprenticeship Week – a moment dedicated to celebrating apprenticeships, and new routes that can lead to them such as T Levels, as well as their positive impact on communities, businesses, and the wider economy.

This ambition is shared by the Skills for Life campaign which helps SMEs understand all the technical education training and employment schemes available to them, including the aforementioned Apprenticeships and T Levels as well as Skills Bootcamps, HTQs and Multiply numeracy courses. 

“We’ve transformed the skills landscape with expanded apprenticeships and new T Levels, revolutionising opportunities for young people to climb the ladder of opportunity towards their first job or further study, and giving businesses the skills they need to thrive,” says Robert Halfon, minister for Skills, Apprenticeships and Higher Education.

HRD Connect Curators of the New Business Landscape. HRD Connect produces industry-recognized content for senior HR leaders. Through articles, case studies, Q&As, podcasts, events, and more, we offer truly progressive and cutting-edge insights designed to help people leaders address core HR challenges and add greater value to their business.

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