A growing skills gap is set to pose significant challenges for small and medium-sized manufacturers (SMEs) across England in 2025, with nine in ten companies reporting shortages in key areas, particularly at entry level, according to the latest Skills Horizon Barometer report.
The study, now in its third year, was launched by the Department for Education’s Skills for Life campaign. It reveals that 92% of manufacturing SMEs anticipate a skills shortfall within their business over the next year. Entry-level positions are of particular concern, with 33% of businesses identifying gaps at this stage. Additionally, 38% of SMEs highlight specialist roles as an area of growing difficulty in recruitment.
Despite these ongoing challenges, concerns regarding staff retention have slightly decreased. This year, 30% of SMEs cited it as a worry, compared to 33% in 2024.
AI and Digital Skills in Demand
The report also indicates a shift in employer priorities, with AI and digital skills becoming increasingly important in recruitment. Nearly a quarter (23%) of SMEs plan to either train their workforce in AI or recruit individuals with AI expertise. Currently, 19% of SMEs report using AI regularly in their daily operations, while another 20% use it occasionally.
While technical skills remain crucial, the research suggests that manufacturers are placing greater emphasis on soft skills and personality traits when assessing candidates.
Recruitment Strategies Evolving
The report highlights a growing willingness among manufacturers to hire early-career talent. Nearly half (49%) of SMEs are looking to recruit entry-level candidates who already have some workplace experience. While 19% continue to prioritise graduates from traditional academic routes, 22% are open to hiring directly from school or college. A quarter (25%) say they would consider candidates with transferable skills from unrelated sectors.
To address the skills gap, the Skills Horizon Barometer encourages SMEs to explore technical education pathways such as Apprenticeships, T Levels, Higher Technical Qualifications (HTQs), Skills Bootcamps, and digital and numeracy courses.
The Role of Apprenticeships
Stephen Wilde, Managing Director of Hampshire-based Southbourne Rubber, emphasized the role of apprenticeships in filling workforce gaps and driving business growth.
“Like other SMEs, we aim to onboard more entry-level staff in 2025 and will be looking to apprentices to do so,” Wilde stated. “We typically hire three to four apprentices a year. The benefit is being able to upskill people to meet demand while focusing on personality and culture fit. We train them from the ground up and bring in fresh thinking and enthusiasm.”
He also encouraged other businesses facing similar challenges to consider technical education routes, calling them a valuable long-term investment.
Government Commitment to Closing the Skills Gap
Minister for Skills, Apprenticeships, and Higher Education, Jacqui Smith, reaffirmed the government’s commitment to addressing the skills shortage.
“Meeting the skills needs of the next decade is central to delivering the Government’s Plan for Change,” she said. “Employers are key partners in our mission. Through Skills Bootcamps, apprenticeships, HTQs, and T Levels, we’re equipping businesses and individuals to thrive — and laying the foundations for long-term economic growth.”
As SMEs brace for the challenges ahead, the focus remains on fostering technical education and investing in workforce development to ensure sustained growth in the UK manufacturing sector.
