Nearly 80% of UK SMEs are under pressure to raise prices as labour and raw material costs increase, according to research from skills charity Enginuity.
The survey found that almost three-quarters of smaller businesses plan to pass higher costs on to customers, the first time a majority has given that response since Enginuity began its regular snapshot research.
At the same time, two-thirds of SMEs are not operating at full capacity, repeating the position recorded last year and adding to concerns over the outlook for economic growth.
Fewer than 40% of respondents expressed confidence about the next three to five years, while financial constraints were identified as the biggest obstacle to investment in skills development.
SKILLS SHORTAGES WEIGH ON OUTPUT
Enginuity estimates that skills-related problems are costing the UK’s engineering and manufacturing sectors about £5.2 billion in lost revenue each year because businesses are unable to optimise production.
The findings come as skills and employment policy moves further up the political agenda, including work by the Milburn Commission on the number of young people not in education, employment or training and government plans covering work experience, skills training and vocational qualifications.
Ann Watson MBE (pictured), chief executive of Enginuity, says: “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, which make up more than 90% of the manufacturing sector, 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.”
SMES UNCLEAR ABOUT AVAILABLE SUPPORT
The research also points to limited awareness of government skills initiatives. Almost two-thirds of SMEs surveyed do not fully understand the support available, while only 10% believe new apprenticeship units will effectively address existing skills gaps.
