The subject may have slipped from the headlines of late, but staff shortages remain a critical issue for small businesses. A new report shows that firms are still struggling with the costs of recruiting and retaining talent. So the big question is, how can they afford it?

How are small businesses managing labour costs?

According to a new study from the British Chambers of Commerce, nearly two thirds of small businesses are experiencing skill shortages, with the level at almost three quarters for manufacturing firms in the sector.

Notably, beyond wage expectations, which have increased in the face of the sharp rise in living costs, flexible working conditions (such as allowing working from home, compressed hours and job sharing) and wellbeing at work (including occupational health provision) are listed as important factors in terms of recruiting and retaining staff in the study.

The obvious barrier here for small businesses is cost. Given the state of the market in recent years and the rise in operating costs, and the pressure this has put on cash flow, it is hardly surprising that finding more money for recruitment and staff retention is challenging.

Tellingly, the Federation of Independent Retailers has recently highlighted the impact of rising wages on smaller firms, calling on the new secretary of state for business for more support with staff recruitment and training. Furthermore, the most recent Small Business Index from the Federation of Small Businesses shows that the impact of labour costs on overall costs is at its highest level, contributing to a drop in overall small business confidence for Q2 2024.

Recruiting talent and how alternative lenders can help

The findings from the British Chambers of Commerce and the Federation of Small Businesses and the statement from the Federation of Independent Retailers underline the difficulties that small businesses face when it comes to staff recruitment and retention. While talk of economic upturn continues to grow, the here and now remains challenging. Against this backdrop, how can firms afford to invest?

Alternative finance can help.

Services such as invoice finance, asset finance and peer-to-peer lending are proving a vital source of capital for small businesses in the current funding climate (with 65% more SMEs experiencing difficulty in accessing finance from high-street banks). These alternative finance facilities, which offer a more easily accessible, affordable and personalised approach to lending, are helping small businesses survive and target recovery, stability and growth.

This profile has helped cement the reputation of alternative finance in the business sector. Notably, the new Growth Guarantee Scheme will provide a wide range of finance facilities to smaller firms, including asset finance, invoice finance and asset-based lending. This is further proof that alternative lenders are increasing filling the small business funding gap.

Small firm finance options for finding and keeping key staff

Labour costs is not a new problem for small businesses, but as the recent studies show, it remains a significant barrier to growth. Firms need to recruit and retain talent if they are going to survive and grow, but to do so, they have to find the money to invest. This is why it is important that these businesses are aware of all the finance options available to them, including the services of alternative lenders.

To find out more about A&T Business Associates services, contact Steve Bowles on 01903 602211 or steve.bowles@atbusinessassociates.co.uk.