Wales Needs a Skills System That Works for Small Businesses

Learning has the power to transform lives and, for small businesses, it can transform prospects too.

Persistent skills gaps act as a brake on SME investment, constrain ambition and hold back productivity. For many Welsh small businesses, scaling successfully depends on meeting their specific skills needs, including those of business owners themselves, while anticipating the capabilities required to seize emerging opportunities, from digital innovation to the transition to net zero.

Yet smaller firms face disproportionate barriers to training, including limited information, time, mentoring capacity and finance.

That is why the Federation of Small Businesses’ response to the Welsh Government commissioned Skills Audit calls for a system built around

SMEs’ day-to-day realities. SMEs make up 99% of Welsh businesses; if the system is too complex for them, it is not working for Wales. `

Provision works where employers have trusted relationships with colleges, providers or advisers. Too often, however, it is fragmented, slow and inaccessible to a time-poor microbusiness balancing costs, staff-release pressures and commercial needs.

For a firm with no HR department, these barriers can delay expansion, technology adoption and new contracts, with owners absorbing work that should be delegated.

The Audit must therefore do more than list shortages. It should recognise employer investment, upskill the existing workforce, make provision responsive to demand and give SMEs a clear route to support.

Central to our case is a national commitment to in-work learning. The public conversation about skills still concentrates overwhelmingly on young people entering the workforce, rather than the people already working in Welsh businesses. Around 1.5 million people are in work in

Wales, while roughly 55,000 young people reach 16 each year. On that broad comparison, it would take more than a quarter of a century for new entrants to equal today’s workforce.

Initial education is vital, but Wales cannot meet its productivity, digital, net-zero and demographic challenges by focusing on new entrants alone. Most of the next decade’s workforce is already employed and cannot pursue a full qualification whenever a role changes. Short, credit-bearing, stackable modules would build practical skills alongside work and help businesses respond to new opportunities.

We have also advocated a “no wrong door” approach. Employers should receive a timely response and referral, not be left to navigate the system alone. A visible brokerage service connected to Business Wales could diagnose needs, find provision and aggregate demand across small firms.

Policy should also recognise the substantial skills development SMEs already provide. Modular accreditation, recognition of workplace learning, shared training and support for supervision costs would strengthen that investment.

Apprenticeships show how targeted incentives could turn dispersed SME demand into viable opportunities. We propose a small-business collaboration voucher enabling firms to share supervision, administration and off-the-job training costs, brokered through existing business and local networks.

Reform must also change what is measured. National totals can hide weak reach into microbusinesses, rural communities and smaller labour markets. Targets should be segmented by firm size and geography so providers are accountable for reaching smaller firms.

The Skills Audit can move Wales from describing shortages to fixing them. FSB Wales’s agenda is practical. Value the existing workforce, modularise learning, respond to employer demand, create an SME-friendly front door, recognise workplace learning, share apprenticeship costs and measure reach.

Welsh Government should now turn consultation into implementation, with clear ownership, milestones, resources and transparent reporting.

Small businesses do not need another static map of the problem, but a responsive partnership that helps them invest, innovate and grow.

Build the skills system around SMEs and Wales will strengthen productivity, resilience and opportunity.