Ahead of next week’s Autumn Statement, the government has unveiled its new ‘Back to Work’ Plan’. The package of employment focused support is aimed at helping small businesses address the number of workers currently on long-term sick leave.

This year has seen consistent records set for the numbers of employees out of work due to ill health. In July, official figures showed that 2.5m people were not currently working following a spike in stress-related burnout, exacerbating worker shortages for employers.

The additional support comes alongside tougher sanctions for people who don’t look for work, including those who are currently claiming Universal Credit.

In a press release, Chancellor of the Exchequer, Jeremy Hunt, said: “We must address the rise in people who aren’t looking for work – especially because we know so many of them want to and with almost a million vacancies in the jobs market the opportunities are there.”

Fit notes to be made fit for purpose

Amidst soaring levels of inactivity among working-age people, the Back to Work scheme has been billed as a way to help people “stay healthy, get off benefits and move into work”.

Targeting a joined-up approach to employment support, the package promises £2.5 billion of investment over the next five years to help those with mental health conditions stay in or find work.

It relies on increasing the number of people who can access frontline public health services like NHS Talking Therapies, a treatment for conditions such as depression and anxiety. The government says it will help an additional 384,000 people access the course by 2028.

Under the new plans, ministers will also trial unspecified reforms to the fit note process. Fit notes are medical certificates which workers must show to their employer if they are unable to work. 

The government says it will “make it easier and quicker for people to get specialised work and health support, with improved triaging and signposting.”

Last year, changes to the legislation enabled nurses, occupational therapists, pharmacists, and physiotherapists to legally certify fit notes. At the time, the government said it would evaluate the impact of the changes at the end of 2023.

No funding announced for NHS yet

Combined, the government says the measures will serve to funnel over half a million people back into the UK workforce over the next five years. However, the scheme does not address one of the key underlying causes of the labour shortage: the NHS.

Stretched care services, exacerbated by worker strikes over the past year, have led to increasingly long wait lists at hospital and GP services. This has resulted in many employees on long-term sick leave unable to access care. 

Last month, the now ex-health secretary, Steve Barclay, pushed for the NHS to receive £1bn in additional funding in the Autumn Statement to cover the costs of strikes and allow it to provide critical services including for mental health.

Responding to the announcement, shadow work and pensions secretary Liz Kendall said: “This poor excuse of a proposal does nothing to fundamentally change the state of our health service or our Jobcentres after a decade of failure from the Tories.”

Incentives balanced out by penalties

Alongside further support measures for employers, the government has also announced tougher penalties for those who claim Universal Credit, but are still unemployed after six months.

As part of an expanded Restart scheme, this group will be given coaching, CV and interview skills, and training to help improve their chances of finding work. The scheme will be extended for two years until June 2026.

Universal Credit claimants who are still unemployed after the 12-month Restart programme will be given access to a work coach, who will find what the government describes as “mandatory work placements” for the claimant.

If a claimant refuses to accept the potential placement, their Universal Credit claim will be closed. This will also end their access to additional benefits such as free prescriptions and legal aid.

What does Back to Work mean for presenteeism?

Taking the stick approach to get more people back to work, many of whom will have physical or mental conditions, will raise red flags for some business owners. 

While the government announcement does specify that only those who are able to work will have their Universal Credit removed, there is a risk that the new scheme could encourage presenteeism in the workplace.

Presenteeism is where staff turn up at their desks while feeling ill or burnt out. And, under UK employment law, those with long-term sickness count as having a disability in law, which means they may also have legal protections against dismissal.

This could end up doing more damage, with workers neglecting to take necessary sick leave and contributing to a growing engagement crisis in UK workplaces. 

In October, Gympass’ second annual State of Work-Life Wellness Report found that 67% of UK employees report that their productivity is lower when they feel lonely, and less connected with their workplace.

As a response, many SMEs have taken to introducing their own employee support measures, as well as benefits and perks, to alleviate the impact on the workforce and reduce turnover rate.

The government has announced a £200m digital skills training package to help people across the UK launch careers in high priority sectors.

As the UK commits to have a net zero economy by 2050 and plans to become a global leader in AI, the digital, green energy, and construction industries will be the primary beneficiaries of the scheme.

Investment will be targeted at specific skills for each region, driven by businesses in their local improvement plans. The training package will be rolled out through universities and government schemes.

Some key jobs will be in environmental consultancy and electric vehicle manufacturing. This was outlined in the recent King’s Speech and the government’s priorities to bolster innovation and Research & Development (R&D).

The scheme will also fund higher technical qualifications (HTQs), which are designed in close collaboration with employers so they can equip students with the skills they need to go onto further study or straight into a job.

“Digital skills are essential in the modern workplace as organisations take control of fast-moving technologies such as AI, so it is great to see the government’s investment in this area,” says Margo Waldorf, Founder at Change Award.

The urgency of upskilling

The government’s commitment to digital upskilling follows a widening digital skills gap in the workforce.

According to a survey by IONOS in collaboration with YouGov, 29% of small businesses said the ongoing shortage of skilled workers poses a high or very high risk for their business.

Similarly, a Salesforce survey found that only one in ten global workers have key AI skills and that 14% of respondents have roles that rarely involve digital expertise like encryption, cybersecurity or artificial intelligence.

This gap is not only wide, but costly – the digital skills gap is costing the UK economy an annual £12.8bn.

“Businesses are crying out for more people with technical skills to fill the great jobs we have today and new ones in the developing green economy,” emphasises Jane Gratton, Deputy Director of Public Policy at the British Chambers of Commerce.

“It’s vital that everyone can access the training they need locally to grasp these opportunities,” she adds.

Research by Deloitte and Digital Poverty Alliance found that there are 13-19 million people in the UK who are digitally excluded, which deprives them of the devices, skills, and connectivity needed to advance their professional career.

Although this policy is welcomed by some experts, others have approached it with more scepticism.

“While it is great to see the government taking action with this skill package, more must still be done to ensure everybody in the country has access to basic digital skills and technology,” warns Elizabeth Anderson, CEO of the Digital Poverty Alliance.

As the Autumn Statement approaches, industry experts suggest a more holistic approach should be taken by the government, particularly around R&D and innovation.

Westminster and Camden rank as the best unitary districts in the UK for startups, based on a study conducted by a merger and acquisitions advisor.

Webacquisition.com conducted a study comparing unitary districts based on the number of new enterprise births, percentage of Year-on-Year business counts growth, business survival rates, average Gross Domestic Household Income (GDHI) per hour worked, and other key indicators.

Based on these indicators, Camden and Barnet were awarded a credit score of 80 and 70.5 out of 100 respectively.

On the opposite end of the spectrum, Merthyr Tydfil in Wales and Inverclyde in Scotland ranked the lowest, with a 40 and 40.11 credit score respectively.

In the study, out of the 20 best unitary districts to fund a business, 10 were based in London. This speaks to the enduring funding gap between the North and the South, despite government efforts to narrow it.

Levelling up or down?

The top unitary district to fund a startup, London’s Westminster, had the highest number of new enterprises in 2022 with 7,145. It also boasts an impressive business survival rate of 46.3%, making it a premier region for business and affluence.

Ranking fourth, Birmingham in the West Midlands is the first non-London district to rank in the top 20. It has a 26.32% business survival rate and has a 70.32 credit score.

On the other side of the coin, Merthyr Tydfil in Wales has a negative YoY growth of -0.49% and scores a low 40 credit score.

These figures paint a picture of the slow yield of the Levelling Up initiative, set forth by the government in 2019 as part of an eight year project to bridge regional economic disparities.

The Levelling Up fund was awarded to over 100 projects this year across England, Wales and Scotland.

Despite the well-intentioned ethos of the policy, a recent investigation by The Guardian found that 95% of local authorities that received funding in the past year were unable to spend all of their share.

This was due to the funds being handed over too late due to bureaucratic hurdles and a hollowing-out of council expertise.

Startups 100 Index exclusive data corroborates this pessimism – London startups receive an average of £15m in early-stage investment, eight times more than the average for companies across the UK.

This disparity is affecting the scalability and sustainability of startups. According to a report by Nucleus, some 55% of SMEs believe regional inequalities are affecting their ability to hire highly skilled workers. Meanwhile, 47% said regional funding gaps are impacting the business financial health.

As inflation is set to stubbornly persist at 6.7% until September 2024 according to Office for National Statistics (ONS) figures, it’s more crucial than ever for small businesses in poorer areas to access funding.

Staying afloat

The Chancellor is set to deliver the Autumn Statement on 22 November. It’s expected he’ll outline the government’s macroeconomic policies for the next coming months, which could significantly shape the economic environment SMEs have to navigate as they struggle to stay afloat.

As corporate tax is expected to stay at 25% and banks scale back funding support for SMEs, small businesses will need to find agile ways of cutting costs and engaging in creative methods of raising money.

What’s it like to lead with your former boss in the room, now in a junior position to your own? As David Cameron made his way into Number 10 this week to be named as foreign secretary, business owners have their own views on the leadership dynamics going forward.

Cameron hasn’t sat around the Cabinet table since 2016, when he quit as Prime Minister after the Brexit vote. At the time, current Prime Minister Rishi Sunak had been elected as MP for Richmond after a stint working for Cameron’s Conservative Party.

Some fear Cameron’s ‘older statesman’ presence in government could put the younger Prime Minster off his stroke.

“Boundaries, boundaries and more boundaries!” is Melissa Howard’s advice to Rishi Sunak, after going through a similar experience. “Prioritise maintaining a high level of professionalism and formal communication, as you would with any team member”.

Finding a new footing

Howard, a former NHS administrator, started her career in the health service working for her mum, who was the manager of a large GP practice. Over 15 years later, she took her mother on as an associate in her own business, web and graphic design service MDH.

“Be prepared for the unique emotional dynamics such a role reversal might entail,” she warns.

Melissa’s situation added family dynamics into the mix, but even those without these complications say the transition is tricky.

Kraig Kleeman, founder of sales outsourcing business The New Workforce, ended up being the boss of his own former boss – who became the vice president of sales at his company. While he says the relationship worked because of the “secret sauce” of their close friendship and teamwork, he acknowledges it was hard to get started.

“Both sides expected a seamless transition because we worked well together in the past, but our reality did not quite fit this altruistic approach,” he explains.

“My ex-boss did not find it easy to go from being the top dog to reporting to me. Different leadership styles and ideas about who’s in charge did lead to conflicts.”

Josh Amishav, founder of cybersecurity group Breachsense, has been through something similar. “It was initially difficult to separate our past relationship from our current one,” Amishav tells us of hiring a former manager.

Fostering new dynamics

Open lines of communications are key to making these new relationships work, say employees-turned bosses.

Kleeman says that a frank discussion at the start of the new working arrangement saved a lot of pain later.

“Define roles, responsibilities, and how to navigate this new situation,” he advises. Once you’ve had this chat, the boundaries set will need to be kept in mind continually.

“Avoid personal drama and act professionally to create a positive work atmosphere.”

Giving a former boss a level of personal responsibility can help remove feelings of frustration, Amishav counsels.

“Having clearly defined roles and responsibilities helped avoid confusion around responsibilities and decision-making. A few things that helped make the relationship successful were communicating expectations and tasks very clearly and then giving him autonomy to execute,” Amishav says

Howard adds that revisiting the health of the relationship frequently can also save pain.

“Regular check-ins and feedback sessions are crucial to ensure both parties adapt well to the new dynamic. Always keep your focus on the business goals, ensuring that decisions are made in the best interest of the company. And importantly, don’t forget to celebrate your joint successes, as they are vital in fostering a successful and harmonious working relationship.”

A worthwhile struggle

While new power dynamics can be tricky to establish, Rishi can take heart from business owners who say the role reversal can bring benefits too.

Kleeman points out that one of the perks of employing a former boss was knowing what he was getting.

“When I had worked with my ex-boss before, I had the inside scoop on their skills and quirks. That was super helpful in making the most of their talents,” Kleeman says.

“We already had trust, which created a positive workplace where everyone felt valued and motivated.”

Amishav agrees that he valued the skills and experience brought by ex-boss, now an employee. “The primary advantages were leveraging my former boss’s experience and connections. There was certainly some knowledge transfer and mentoring happening.” Howard adds that, when the going gets tough, keeping your eye on the benefit of the changing relationship will help get you through.

“You get to establish a trusted working relationship with someone who truly understands you, including your strengths, weaknesses, and can swiftly pinpoint your blind spots,” Amishav tells us.

“However, it’s equally important to stay aware of potential risks. These include changes in relationship dynamics, the possibility of breakdowns, boundary issues, and the risks associated with favouritism.”

It’s certainly something to keep an eye on, post cabinet reshuffle.

Rosie Murray-West

Rosie Murray-West is a freelance journalist covering all aspects of personal finance, as well as business, property and economics. A former correspondent, columnist and deputy editor at The Telegraph, she now writes regularly for publications including the Times, Sunday Times, Observer, Metro, Mail on Sunday, and Moneywise magazine.

New data reveals that 83% of brokers believe high street banks are reducing their funding support for the UK’s 5.5m SME industry.

The survey conducted by iwoca, one of Europe’s largest small business lenders, suggests the SME funding gap could continue to widen as lending options are set to worsen in the coming months.

Data also reveals 82% of brokers expect SME demand for capital to rise in the next six months as inflation persists. Figures from the Office for National Statistics (ONS) predict that inflation will remain at 6.7% in the year leading up to September 2024.

Accordingly, 51% of SMEs now have a negative view of major banks, as data indicates that for four consecutive quarters they have scaled back SME financial support.

The results released by iwoca are part of its quarterly SME Expert Index, which surveys over 100 UK SME finance brokers, who collectively submit over 2,000 small business finance applications a month.

The struggle for SME funding

The drying up of traditional lending channels is not a recent occurrence. According to the Index, this is the fourth consecutive quarter where more than 80% of brokers have warned that major banks have reduced their support for the UK’s small businesses.

The pattern is set to persist, as 75% of brokers predict that high street banks will continue to reduce access to working capital over the next 12 months.

As SMEs submit applications for funding, 61% of financing experts have indicated small enterprises request loans to manage cash flow rather than to fund company growth.

Overall, this portrays the pessimism SMEs have towards the current macroeconomic climate. In fact, 58% confess they don’t believe the Prime Minister will meet his target to halve inflation by the end of the year.

“This research demonstrates as in the clearest possible terms that SME funding options are being stripped back – better suited lenders can and must step into the place of traditional banks,” points out Colin Goldstein, Commercial Growth Director at iwoca.

“Small and medium sized businesses need our vital financial support on the long road to economic recovery,” he adds.

As the Chancellor is scheduled to deliver the Autumn Statement on 22 November, with predictions that high corporate tax thresholds will persist, small businesses would be strategically sound to find alternative sources of finance to weather the macroeconomic storm.

Research indicates that SME owners have a confident understanding of artificial intelligence, but that barriers continue to hinder its widespread adoption.

The results published by iwoca, one of Europe’s largest small business leaders, unveiled that 55% of SME owners understand AI, with 27% revealing they use AI across their businesses.

SME owners are three times more likely to think AI is a positive, rather than negative, development for their business, and 20% predict the technology could save their business up to 10 hours per week.

Despite this overwhelmingly positive outlook on AI, hesitation continues to bog down SME owners’ more use of AI-led automations and machine learning.

AI in the workplace – friend or foe?

According to the iwoca survey, over half of small business leaders feel nervous about using AI in their company. Some three in ten even believe AI could ruin their business model.

The hesitation that prevents SMEs from adopting AI is multi-faceted. Of those surveyed by iwoca, 41% said AI is not relevant to their business; 18% think they lack the technical expertise to implement it; 17% complain the cost is too high, and a further 17% are concerned about algorithmic bias.

This reticence towards AI is present outside of boardrooms. According to a Salesforce survey, only one in ten global workers have in-demand AI skills despite 25% ranking AI proficiency in the top three most important digital skills to have.

“Defining AI’s applications for your business and identifying specific areas for its use are key to demystifying it,” explains Mark Di-Toro, Director at iwoca. “The overarching concept of AI can seem daunting, but – if used properly – we’ve seen that the technology can drive practical benefits, saving time and money.”

Embracing the changes to come

Understanding how to use AI will be key to minimising the disruption the technology could cause – whether that is changing the nature of how a job is approached, or making certain occupations redundant altogether.

In the view of 64% of HR managers, AI is changing key in-demand skills. A further 85% are currently planning some kind of Learning & Development investment to future-proof their employees for the further spread of AI.

“AI means there’s a new interesting way of differentiating professionals now and it comes from the adaptability to embrace change and being creative and being able to use AI to innovate the business,” reflects Ludmila Milla, co-founder of Learning & Development platform UJJI.

Whether AI is seen as a threat or a productivity tool will depend on how prepared SME owners are for the technology.

Setting the tone for AI’s adoption

The doubt SME owners have towards AI is arising in the midst of a critical policy juncture.

The UK has just hosted a high profile AI Safety Summit to understand the risks posed by frontier AI, and the regulations that should be enforced to control how the technology evolves.

Clear regulations could help cure part of the hesitation SME owners have expressed. In fact, 61% want guidelines to be established for AI’s safe use.

To prepare the next generation, the government has also announced the launch of 800 scholarships worth £8m to equip eligible students with practical AI and data science skills.

Experts note these initiatives will take time to take effect, therefore, taking a proactive approach to learning & development to future-proof workplaces will help SMEs ride the digital transformation wave rather than being wiped out by it.

Read more:

• Why AI isn’t going to cure all SMEs’ productivity problems

WeWork has issued a holding statement to UK tenants following a disastrous week for the firm which saw it file for Chapter 11 bankruptcy in the US.

The global coworking space provider – which has been threatening failure following a series of high-profile financial and PR losses – was first reported to be facing insolvency by the Wall Street Journal last week.

On Monday morning, it officially filed in New Jersey, according to a statement from the company. WeWork’s saga marks one of the biggest startup failures in recent decades, having previously been valued at $40 billion back in 2019.

WeWork has 63 locations in the UK, 36 of which are based in London. UK members had previously been left in the dark about what this news meant for their membership contracts, some of which are worth several thousands. 

In an email sent yesterday afternoon and seen by Startups, WeWork CEO Dave Tolley reassured its members that “WeWork is here to stay” adding that “your membership agreement will not be impacted by this process.”

Will WeWork’s members be able to keep working?

Tolley’s bullish outlook for the future of WeWork may not be enough to alleviate the woes of many WeWork members, however, many of which are startups or small businesses with limited cash flow to risk.

Media updates of the firm’s financial troubles have been well-documented, and many have their doubts about whether to stick with the provider or move elsewhere. Between Q1 and Q2 2023, the firm reported a global drop in physical memberships of around 29,000.

Calum Russell, CEO of Flexible Workspace operator Covalt, comments: “WeWork’s problems were well known. From the outset many within the industry were saying that the company was entering into an excessive number of onerous leases and over-leveraging.”

The good news for members is that, as the WeWork tower has slowly begun to crumble, many other cheap coworking or flexible office space providers have stepped in to provide competitively priced services with significantly strengthened margins.

This means SMEs searching for flexible office space still have plenty of options to choose from. Even if WeWork begins scaling back its lease holdings in the UK, which remains a possibility, new operators will likely be quick to step forward and fill the gap.

“WeWork’s problems are unique to them,” adds Russell. “The recent headlines about WeWork belie just how well the flexible office market has performed recently. In London and other major cities like Manchester, the market continues to go from strength to strength. 

“WeWork is not a bellwether, or a synonym, for the sector. We are yet to know the full extent of the WeWork fallout, but we can be certain of one thing – flexible office space is here to stay.”