The number one problem for British start-ups

I spend a lot of time on the road. It’s one of the things I like the most about being Red Hot Penny Shares editor.

On a given day I might find myself in a lab in Cambridgeshire, or a factory in the West Midlands, or a trendy coffee house in East London. I get to meet the most ambitious people in the country and they tell me about their big projects and big plans.

Their ideas are all very different, but a lot of them seem to have the same problem. It’s got to the point where I almost know when they’re going to bring it up.

These guys are world-class problem-solvers, so why are they all so worried about recruitment?

The people problem

Well, say you’re the head of a start-up. You’ve got the hard part right – you’ve found a new idea and a gap in the market. But that’s only part of the story. Unless you can find the right people with the right skills, you’ll never make your idea a reality.

I’ve heard it so many times now. In fact, it’s made me wonder if the companies I tip in Penny Sleuth and Red Hot Penny Shares are necessarily the ones with the best ideas. Maybe they are simply the ones who managed to make their idea work.

And when I began to investigate, I found that this problem is bigger than I thought.

Just how big? Well, last year, when businesses in Tech City (aka Silicon Roundabout, the tech cluster in East London) were surveyed by market research firm GfK, 45% of them said that a shortage of skilled workers is the biggest challenge they face.

A few days ago I came across another survey. This one was conducted by Harvey Nash, a global IT recruitment consultancy. When asked, almost two-thirds of companies in the survey said that their digital strategy was being impeded because they lacked the right talent.


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So what’s going on?

This is the first time skill shortages have become a real concern since the recession hit – so what’s happening here?

Well, part of the problem is education. Can that really be true? Britain dominates the university league tables in areas such as health and clinical research. We are producing some of the best life sciences graduates in the world. But we’re just not producing enough of them. And because of that, high-tech industries are being starved of the highly-educated graduates they need.

In March, the Confederation of British Industry said it lacked 80,000 science, engineering and manufacturing graduates for the next two years alone.

Of course, it’s also down to companies changing their business models as they try to grow. The old skill sets they wanted, the people they hired, no longer cut the mustard. This is made worse by immigration rules which keep some developers and experts from plugging the gaps.

And don’t forget, we’re competing for talent globally here. Quite aside from Silicon Valley in the USA, there’s Hong Kong, New York, Shanghai – even Tel Aviv – and many other growing tech hubs besides. These are all siphoning off professionals who might have come here.

But the future is bright

This might sound like a load of doom and gloom. But despite the near-term skill shortages, I’m positive about Britain’s long-term tech future.

You see, the powers-that-be have woken up to the problem at last. This week the press reports that our leading universities plan to spend £9bn to attract the world’s best students.

Projects include a major new engineering building at Sheffield and a ‘science central’ incubator space for science start-ups at Newcastle. With initiatives like this we should be more than capable of filling these skills gaps and maintaining a strong tech sector.

By focusing on:

1. Educating our young people in relevant disciplines,
2. Making sure that Britain remains attractive to the world’s top brains, and
3. Improving infrastructure,

We can make sure that Britain’s start-ups don’t get left behind. That way, our entrepreneurs can find more important things to worry about!

This article is taken from our FREE penny share investment email Penny Sleuth.
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5 Responses

  1. 22/05/2014, Aussie61 wrote

    David,
    Ref the shortage of ‘skilled workers’ highlighted by you today. In truth what there is a shortage of at locations like Silicon Roundabout is skilled workers who will do the job for low salaries (hence your comment on immigration controls). Vince Cable stated a couple of years ago that any restriction on immigration numbers would negatively affect business. For once he was right, he was thinking about cheap labour from Asia and eastern Europe. Conversely, I well remember about 3 years back an article on TV news highlighting the plight of 24 graduates from a good Belfast University in IT related trades. After some months only two had found work related to their qualifications. Of the rest twenty had either emigrated (Australia/Canada) or were planning to do so in order to secure suitable employment.
    So the moral of the current situation is: Education of our own partially paid for by these IT companies.

    CockneyOz.
    in order to

    • 23/05/2014, Andrew M wrote

      Quite right: there is *never* a shortage of skilled workers.

      If there was a genuine shortage, we would see wages shooting up in those sectors. Instead salaries for scientists in the UK have stuck to the same trend as the rest of the economy, and my local Porsche dealership isn’t inundated with enquiries from cell biologists or computational chemists.

      Whenever you see some business person quoted complaining about how he or she can’t find workers with the necessary skills, ask what wage they’re offering. Almost always, it turns out that what they want is highly (and expensively) educated workers at a manual-labour wages. No wonder they come up short.

  2. 23/05/2014, Badger wrote

    “These guys are world-class problem-solvers…”

    In which case they will have no difficulty working out that if they offer to pay peanuts they will get monkeys.

    It’s not rocket science and there is not a shortage of skilled workers – just a shortage of Porsche driving businessmen prepared to pay them adequately.

    Having experienced the situation from both sides of the line they (the businessmen) deserve everything that they (don’t) get.

  3. 27/05/2014, Angela wrote

    That’s right. One of my kids graduated with a degree in Internet Computing nine years ago, and, like most of the kids on the course, was unable to find work in the field. Employers were looking for experienced people who were willing to work for peanuts. That means skilled people imported from low wage economies.
    There are lots of qualified people here, just not willing to work for the same wages as shelf stackers.

  4. 27/05/2014, Angela wrote

    I have to say, too, that the British ascribe low status to science based occupations.
    In Germany the majority of company directors are engineering graduates, in Britain the opposite is true. In France the title Engineer is equivalent socially to Doctor, in Britain an engineer is the person who changes your car tyres.
    All the educational investment in the world cannot compensate for these disadvantages to Science graduates. Foreign students who train here can go home and become leaders of industry in their home countries, while their fellows here in the UK struggle to rise above middle management.

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