By Max Clarke

The likelihood of small businesses creating jobs to drive economic growth is in jeopardy because fewer believe they will be able to employ new staff in the year ahead, a new survey suggests.

According to the latest quarterly Referendum research from the Forum of Private Business over a fifth of small business owners expect to recruit in 2011 — but confidence that they will be able to do so is dwindling compared to December 2010, when almost 30% of respondents said they planned to take on new staff.

While 14% intend to simply recruit in the coming year a further 8% plan to hire but believe they will have to train new staff in the necessary skills their businesses require.

In addition, business owners surveyed by the Forum have identified a pressing need for external support and training for themselves and senior managers in a number of key areas, including finance, product development, employee engagement and sales and marketing.

“It is concerning that small business owners’ confidence in their ability to create jobs in the current economic climate and drive recovery is falling, and clearly there is still a pressing need to address barriers such as employment taxes and red tape, steep recruitment costs and skills issues,” said the Forum’s Research Manager Tom Parry.

“But we also need measures to support staff retention - and the upskilling of senior managers and business owners themselves. Further, policies such as the abolition of the default retirement age are unhelpful at a time we should be incentivising business growth and job creation with employment-friendly incentives.

Mr Parry added: “Micro, small and medium sized businesses were responsible for 65% of jobs created between 1997 and 2007, so smaller employers are crucial to job creation in this country.

“In contrast to the United States, where smaller firms are already starting to employ again, the high cost of employment, fear of making a mistake in the recruitment process and the continuing uncertain business climate are deterring our members from recruiting at this present time.”

Overall, 37% of respondents to the Forum’s survey said new staff not being able to ‘fit in’ is their biggest recruitment concern, followed by complying with employment legislation (36%), a lack of technical or specialist skills among recently-hired workers (36%), a poor attitude and unwillingness to learn (31%), the tax system making recruitment unaffordable (23%) and a lack of basic literacy or numeracy skills (23%).

Further, 19% of small businesses surveyed identified difficulties in complying with equalities legislation as their main recruitment barrier.

More than half said they expect to retain their current employees, with an additional 4% identifying a skills shortage among existing workers, while just 4% believe they will have to shed some staff in order to meet their growth plans. In addition, 4% intend to use only subcontracted labour.

Approximately a quarter of respondents said greater profitability would support their efforts to retain staff, with 17% citing less red tape, 15% improving business confidence and 11% support for training in the workplace.

Other beneficial measures identified include more awareness of how to access support, greater flexibility over staff pay and tax perks, simplifying taxation and better access to finance.