North West SMEs held back by skills shortage, says report

A large number of SMEs in the North West have said that skill shortages are holding back their innovation plans, according to new data.

Research commissioned by the regional Llloyds Bank Commercial Banking team has found that, while over a third (39%) of companies plan to increase investment in new products and services in the next five years, almost two thirds (64%) said their research and development efforts were being held back.

Close to half (44%) cited a skills shortage, in areas such as science, technology, engineering and maths, as the main issue.

Despite reporting setbacks, survey respondents were upbeat about their prospects over the next two years, with North West SMEs expecting innovation to drive annual sales up by 6.4%. Growth of the wider UK GDP is expected to stand at 2.4%.

Lloyds Bank Commercial Banking’s North West director, Martyn Kendrick, said of the findings: “What we’re seeing is a growing determination amongst small- and medium-sized firms in the North West to innovate in order to drive competitiveness and secure their long-term success.

“SMEs are ideally placed to lead this charge. They have the advantage of being closer to their customers and more internally flexible, which makes the process of listening to feedback and adapting products and services a shorter cycle.”

He continued: “The scale of the challenge, however, is equally clear. Unless we provide access to the talent necessary to deliver that innovation, we run the risk of missing an enormous economic opportunity.

“That requires a concerted and collaborative effort on the part of the UK’s innovation ecosystem, with skills and funding being the killer ingredients. As a major supporter of small firms, we’re determined to play our part.”

The Lloyds Bank research also discovered that investing in innovation helped 38% of North West SMEs secure contracts and 32% attract skilled new employees.

On average, SMEs in the region have spent 8.5% of their revenue on research and development since 2010. With 14% of sales linked to R&D investment, £1 spent effectively generated £1.69 in sales.

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