Employee training is taking centre stage during National Apprenticeship Week 2025, but smaller firms are still struggling to addressing the skills gap, with cost a major barrier. How can they afford to invest while safeguarding cash flow?

Is the small firm skills gap getting smaller or bigger?

It has been a while since labour costs dominated the headlines, but bridging the skills gaps remains difficult for small businesses. The scale of the challenge facing these firms is laid bare in new research from the Chartered Institute of Management Accountants.

According to the latest Mind the Skills Gap report, two thirds of employees said they received no formal skills training (other than mandatory training) in the last 12 months from their employers. This comes despite over 80% of employers stating that they want to upskill, with a similar amount identifying the need to address skill gaps in their organisations.

Looking at these figures, there is a clear disconnect between employers and employees when it comes to the provision of training and addressing workplace skills gaps. What is causing this? The research from the Chartered Institute of Management Accountants is clear on the main reason.

When employers were asked about workplace training, rising costs and a lack of budget was cited as a key issue, in particular increases in the minimum wage and National Insurance, while the complex nature of government funding was another widely reported barrier. Tellingly, the study also showed that larger companies are more likely to invest in formal training and professional development.

Investing in employee skills and how alternative finance can help

The findings from the new report from the Chartered Institute of Management Accountants are far from reassuring when it comes to addressing the skills gap, with employee and employer thinking seemingly significantly apart.

However, it is hardly surprising that small firms are proving cautious with regard to investment in workplace training given the current economic climate and the unrelenting pressure on cash flow. Notably, the figures also show that firms want to invest despite the headwinds and this is where alternative finance can help.

While there was some improvement in the second half of 2024, coming into 2025 small business lending from traditional sources remains subdued, with 65% more SMEs experiencing difficulty in accessing finance from high-street banks. As a result, alternative lenders have become increasingly embedded in the small business finance landscape.

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. 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.

Notably, the Growth Guarantee Scheme is providing 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 funding workplace training in 2025

National Apprenticeship Week has put the spotlight again on labour costs and the need to address skills gap. While cost-related caution among small firms is understandable as cash flow remains under severe pressure, at the same time, workplace training investment is critical to maintaining forward momentum. This is why it is vital that key decision-makers are aware of all the funding options available to them, including the services of alternative lenders.

To find out more about A&T Business Associates services, contact Tony Hedger on 01903 602211 or tony.hedger@atbusinessassociates.co.uk.