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The Government is being called upon to invest £13m a year to provide HR support to small businesses - as new research shows that it could be a key part of finding the answer to the problem of productivity.  

The new research by the CIPD (supported by J P Morgan through the J P Morgan Chase Foundation) suggests that giving small businesses basic HR support can help in this respect.   The pilot scheme, ‘People Skills’, ran from July 2015 to October 2016 and was based in Hackney, Stoke-on-Trent and Glasgow.  It has been evaluated by a team at Manchester Metropolitan University through surveys and interviews with project stakeholders.

In each of the three locations, a small bank of independent HR consultants was recruited to provide free employment and people management advice to small businesses on demand.  The CIPD’s HR Inform online support system was also made available to project participants.

More than 400 small businesses - employing between 5 and 50 employees across the three areas - were helped.  In Glasgow, it was regarded as being so successful that when the research grant ran out, the city council continued to fund the programme. 

CIPD Head of Public Policy, Ben Wilmott said:

“People Skills’ shows the potential benefits of targeted investment to improve small firms’ capability around the management of people through co-ordinated high-quality, locally-delivered business support via channels such as Local Enterprise Partnerships, chambers of commerce and local authorities.”  He continued, “ If policy makers are serious about addressing the UK’s long-standing productivity deficit - particularly among the nearly 1.3 million small businesses that employ between 1 and 50 people - then they have to start seriously thinking about how to improve management quality, which the Bank of England’s chief economist Andy Haldane has identified as a key area for focus. ‘People Skills’ provides a template of how to actually do this on the ground among small businesses.  We calculate that about £40m from the Government’s National Productivity Investment Fund would support the £13m annual cost of running a ‘People Skills’ type service across all 38 Local Enterprise Partnerships in England for three years and could revolutionise the quality of business support for small firms.”

Hang Ho, EMEA Head of the J P Morgan Chase Foundation, said:

“Small business success is an essential element of the UK economy and a critical component in creating thriving local communities. Today’s report shines a light on the importance of basic HR practices to the success of small businesses, whether that is improving productivity, boosting the effectiveness of the management team or handling crises. While we hope the ‘People Skills’ pilot will benefit participating companies in the long term, the findings clearly also demonstrate to policy makers a real need for HR support amongst SMEs.”

The key findings are that online business support is inadequate unless supplemented by personal advice and support - with face-to-face advice particularly valued by small business owner managers; that existing fragmented business support provided at a local level should be justified to prevent duplication of provision and confusion among SMEs; that policy makers need to re-think how they encourage SMEs to employ and train young people in the workplace - for example through apprenticeships - as in most cases they don’t have the interest or capability to do this. Re-focusing a proportion of government investment in skills to providing enhanced business support around people management capability for SMEs would, over time, give more small businesses the capability and confidence to engage in programmes supporting young people into work in the future.