UK SMEs double down on upskilling amid tight labour market

Small and medium-sized enterprises (SMEs) across the UK are ramping up investment in upskilling their existing workforce as they adapt to a challenging labour market, according to new research from Shawbrook.

The study reveals that nearly half of SME leaders (48%) plan to focus on developing the skills of their current teams over the remainder of 2025, making it the most popular workforce strategy. In comparison, only 29% intend to expand their leadership teams, while just 25% expect to hire new staff.

The findings highlight how businesses are prioritising internal talent development amid growing concerns over recruitment. More than half of SMEs (56%) expressed worries about access to talent in their sectors, with nearly one in five (19%) feeling “very concerned.” The issue is underscored by ONS figures showing that UK unemployment has reached a four-year high, pushing firms to adopt more sustainable, long-term workforce strategies.

When asked what government action would best support growth, 34% of SME leaders called for more national skills programmes, while 28% favoured easier access to overseas talent to help close resourcing gaps and maintain competitiveness.

For many SMEs, the focus on upskilling is already delivering returns. Almost three in ten (27%) cited investment in their existing teams as a key driver of growth in 2024, underlining the long-term benefits of nurturing internal talent.

Neil Rudge, Chief Banking Officer, Commercial at Shawbrook, said: “The first half of 2025 has undoubtedly been filled with challenges for UK SMEs, with the current state of the labour market representing a significant barrier to growth in many cases.

“However, clearly SME leaders know that the core of any flourishing business is the people within it, and it is heartening to see so many make upskilling their team a key priority for the rest of the year.

“Our research shows that businesses who invest in their teams are the best primed for growth. Whilst the wider economic environment remains uncertain, specialist lenders are primed to help ambitious companies unlock the additional value needed to execute their growth plans and turn that ambition into action.”

With talent shortages persisting, upskilling is emerging as a critical growth strategy for UK SMEs – one that supports business resilience while helping companies stay competitive in an evolving labour market.