SME Manufacturers: Meeting the challenges of affordable energy and a skilled workforce
Robert Clark, September 2024
In this report, Civitas researchers surveyed a selection of small-to-medium-sized enterprise (SME) UK manufacturing companies to find out what their greatest challenges and obstacles are.
The survey found that the two issues that most concern SME manufacturers are high energy costs and low availability of skilled workers. The Government has an obligation to address both, since current challenges are the direct result of policy. Success will improve the competitiveness of our SMEs. That, in turn, will boost exports and prosperity across industrial regions of the UK.
On energy, almost all respondents considered affordable energy to be important to their business. The UK has some of the most expensive energy in Europe – meaning the production costs of UK manufacturers may be higher than foreign competitors. More affordable power is overwhelmingly more important to our survey respondents than green power. Most SMEs were not incentivised to work towards a Net Zero strategy, and very few were planning a transition to onsite energy generation.
On training and skills, the biggest barrier to upskilling was that small companies find it difficult to find suitably skilled stand-ins when their employees take time off for training. The proportion of vacancies for skilled workers has increased in recent years; and while a third of the UK workforce has a degree by the age of 25, only 4 per cent have a higher technical qualification. The current levy system of subsidised apprenticeships has not been overwhelmingly effective. SMEs use a very wide variety of external organisations to boost skills, with many relying on further education providers.
The report concludes with 10 key recommendations to support small manufacturers:
1. Incorporate manufacturing skills need into the new Skills England body – emphasising colleges.
2. Comprehensive review of apprenticeship system and reform of the levy.
3. Development of an industrial strategy focused on SME growth.
4. A more sustainable and ‘manufacturing-friendly’ energy strategy.
5. Start benchmarking UK industrial power costs.
6. Incentivise further education hubs to focus on technical skilled workforce.
7. Launch a strategic review of the competitiveness of UK manufacturing, which includes assessing the comparative impact of policy measures.
8. Promote business rate relief for building improvements.
9. Identify imminent skills gaps and increase incentives for relevant apprenticeships.
10. Expand Investment Zones to include more remote regions of the UK.
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