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Business tax breaks needed to fund skills investment

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The economic recovery could be undermined if insufficient investment is made in boosting the skills of UK workforces.

That was one of the main messages to emerge from a new report compiled by the Chartered Management Institute (CMI).

The CMI’s latest economic outlook report, which tracks business confidence among senior executives, painted a rather pessimistic picture.

Describing the post-recession business environment as “toxic”, the report found that the aftermath of the economic downturn is exercising a negative impact on 82 per cent of the firms that responded to the survey.

Although business growth is beginning to recover, some 41 per cent of firms thought that their business operations were still being hampered by the effects of the recession.

The result, the CMI said, is a continuing sense of fragility and frugality among UK businesses.

Constraints on bank lending and reducing costs remain unwelcome features in the business landscape, with 42 per cent reporting that securing long-term finance is a problem and 40 per cent saying that they are reviewing costs as a way of making savings.

Almost half (48 per cent) of UK organisations have kept pay freezes in place, up four per cent on six months ago, and 52 per cent have closed their doors to new recruits, the study revealed.

Many firms believe that the economic situation is set to deteriorate further before a lasting recovery kicks in. Some 70 per cent of firms expect business insolvencies to increase, while only 28 per cent believe employment levels will rise.

Unsurprisingly, a majority of those polled (68 per cent) want the decision to raise national insurance contributions to be reversed, and eight out of ten (81 per cent) think that the government should introduce tax breaks so that employers can put more money into boosting skills levels among employees.

The report found that more than a half of respondents have seen a drop in the funds available for management training.

Lord Eatwell, the CMI’s chief economic adviser, said: “The economy is growing, albeit at an anaemic 0.2 per cent, but the promise of recovery is not enough to sustain our businesses while they wait for the situation to improve.

“British management faces major challenges: in securing the funds and the skilled labour necessary to sustain efficiency, in maintaining morale in their organisations, and in developing the vision and commitment to the investment needed to rebalance the British economy.

“It is evident from our research that the new government will need to make it an economic priority to support managers in every way possible, post-election, to help transform the business environment and stimulate recovery and growth.”

Ruth Spellman, chief executive of CMI, added that it was telling that the strongest support for government policy revolves around investment in skills development.

Ms Spellman concluded: “No matter what the economic conditions, UK plc has no hope of a quick recovery or renewed competitive success without a skilled workforce at its helm. Throughout the downturn, CMI consistently warned that a burgeoning skills gap had the potential to undermine recovery and destroy business confidence. The results of our report justify these concerns. Action is needed now, before the resulting damage becomes irreversible.”