Shortage of skilled staff holds back small companies

The shortage of properly qualified workers is hitting small companies across Britain - and in a growing number of sectors as Catherine Wheatley of Sunday Business reports

All along the affluent Thames Valley corridor, local software firms are bussing in workers from as far away as South Wales to deal with a desperate shortage of skilled IT workers. Others are offering golden handshakes, finders' fees and generous bonus packages in a bid to hire local workers in the area around Reading, where unemployment is less than 2%.

'Unemployment is so low here that there simply aren't the bodies to go round,' explains Andrew Corrigan, policy manager at the Thames Valley Chamber of Commerce. 'It's something that's going to limit our growth and damage our small businesses.'

So acute is the shortage of skilled staff in some areas that the Home Office minister, Barbara Roche, has been moved to suggest that immigration laws should be loosened to encourage talented overseas workers to join British companies.

The shortfall of appropriately qualified workers is a problem that is spreading across a growing number of sectors and regions and is not confined to hi-tech employers. Small firms are just as likely to struggle to find middle managers, and many hotels and restaurants are unable to find suitable catering staff.

A long-term solution is likely to require a much broader approach than simply inviting foreign workers to share the load. Immigration is one welcome solution but, at the same time, there are potentially plenty of people who could join the workforce but who haven't, observes Margaret Murray, head of the CBI's learning and skills group.

The most recent Skills Needs in Britain survey, conducted by the Department of Education & Employment in 1998, found that nearly a quarter of all employers were having difficulties filling some vacancies. Engineers, technology specialists and sales and service staff were in short supply, bu catering, health and road transport workers were also hard to find in some areas.

Government figures published this month suggest the shortage is growing worse: the number of unemployed people claiming benefit now stands a 1.05m, the lowest since 1979.

As call centres replace mines and shipyards as some of the country's most prolific employers, the need to retrain the existing workforce becomes ever more pressing. In addition, 32% of the working population have no achieved a GCSE pass or the equivalent.

Some estimates have found that around seven million adults in England are illiterate and as many as half of British adults have numeracy skills below those expected of an 11-year-old.

In Swindon, where the unemployment rate is also below 2%, local companies have become much more flexible in their approach to hiring and on-job retraining. Many have also joined a successful campaign to locate a new University of Bath campus in the town to ensure a plentiful supply of graduates.

Firms can no longer close their mind to older workers and women who are returning to work after having children, says David Saunders of the Swindon Chamber of Commerce. 'We welcome more flexible immigration policies, but the challenge is to ensure that the best people do come from the UK,' he adds.

More than 10,000 workers travel to Swindon every day from as far away as Bristol, but, in other areas, the lack of labour mobility is a major issue. In parts of Cumbria, for example, there is more reluctance to chase work. Keswick has the second highest job vacancy rate in the UK, according to the CBI, while neighbouring Workington and Whitehaven have some of the wors unemployment.

In the south-east, the problem is exacerbated by a lack of affordable housing. Middle managers and healthcare workers whose salaries do not stretch to meet escalating property prices cannot afford to live in the Home Counties. Such major structural issues could take years to resolve and the short-term immigration fix is broadly welcomed by the leading business organisations.

But most point out that scrapping IR35, the government's unpopular new tax regulations governing IT contractors, would improve the problem too. 'Lightening immigration policies is not unreasonable, but we need to address the skills shortage too,' says Chris Humphries, chairman of the government's Skills Task Force and director-general of the British Chambers of Commerce.