The Hampshire Skills Gap: What Does It Mean for Local Businesses?

Hampshire has one of the largest and most diverse local economies in the South of England. From the marine and logistics industries around Southampton and Portsmouth to professional services, manufacturing, hospitality, technology, construction and thousands of smaller businesses operating across the county, our economy relies heavily on the skills of the people who live and work here.

For local employers, however, finding and developing those skills is becoming a more important challenge.

The latest Skills England Annual Skills Report found that more than a quarter of job vacancies are difficult to fill because of skills shortages. At the same time, investment in developing existing employees has been moving in the wrong direction. Employer expenditure on training in England fell from £49.4 billion in 2019 to £44.8 billion in 2024 when adjusted for inflation. Looking further back to 2011, the reduction is 19%.

That creates a difficult position for businesses. The skills employers need are becoming more important, while the amount being invested in developing those skills has reduced.

What does a skills gap look like in a small business?

For an SME, a skills gap does not always appear as an empty chair or an unsuccessful recruitment campaign.

• It can be the business owner who still has to approve every decision because nobody else has developed the confidence to take responsibility.

• It can be a strong salesperson who has been promoted into management but has never been taught how to manage people.

• It can be one employee holding knowledge that nobody else in the organisation has.

• It can be new software that has been purchased but is barely being used, or opportunities being missed because the business does not yet have enough commercial, digital or leadership capability.

These issues can easily become accepted as part of running a busy company. Over time, however, they can affect efficiency, output and the ability of a business to grow.

The Department for Education's Employer Skills Survey provides some useful context. Across UK employers in 2024, 11.7% of businesses reported having at least one employee who was not fully proficient in their role, while 26.7% of vacancies were proving difficult to fill because applicants lacked the required skills, qualifications or experience.

For an SME with a relatively small workforce, even one capability gap can matter.

Recruitment cannot be the only answer

Recruitment will always be necessary as businesses grow, but employers should also consider how much of the capability they need could already exist within their workforce. Someone who understands your customers, systems, products and culture already has knowledge that can take a new recruit months to acquire.

With the right development, that person may be capable of taking on management responsibility, improving a process, becoming more commercially effective or supporting colleagues around them.

There is also a retention consideration. Employees are more likely to see a future within an organisation when there are opportunities to learn, progress and take on greater responsibility.

For SMEs competing for talent with much larger employers, creating those opportunities can be particularly valuable.

Take a look inside your own business

A useful skills review does not need to begin with a lengthy consultancy exercise. Set aside an hour with your management team and consider five questions:

• Where are we regularly losing time?

• Which responsibilities still depend too heavily on one person?

• Where is a lack of confidence or knowledge affecting output?

• What skills will we need more of over the next two years?

• Who within our existing team could step up if they were given the opportunity to develop?

The answers may identify training requirements, but they may also uncover opportunities for mentoring, job shadowing, greater responsibility or better knowledge sharing between employees.

It is also worth speaking directly to your team. Employees will often have a good understanding of where they feel less confident, what would help them perform better and where they would like their career to progress.

The skills Hampshire will need next

The challenge is not limited to filling today's vacancies. Artificial intelligence, automation and new digital tools are already changing the way businesses complete administrative work, communicate with customers, analyse information and make decisions.

Skills England has identified responding to accelerated AI adoption as one of five major challenges facing the skills system in 2026. It has also highlighted the need for a more locally responsive skills system, where employers, training providers and local organisations work more closely together.

Alongside these newer capabilities, businesses will continue to need good managers, confident communicators, commercially aware employees and people capable of leading teams.

For smaller businesses, preparing for those requirements early can be far easier than discovering the gap when it begins restricting growth.

Why this matters for Hampshire

Skills development has an impact beyond an individual employee or organisation. When someone develops the capability to progress into management, another opportunity can open behind them. When a local company becomes more productive, it has greater potential to grow. When businesses retain talented employees, more knowledge and experience remains within the county.

Strong local economies are built through thousands of individual businesses becoming slightly stronger.

That makes workforce development a shared interest for employers across Hampshire.

Businesses do not need identical skills requirements, and every organisation will be at a different stage. What matters is having a clear understanding of the capability you have today and what you are likely to need next. Before beginning another recruitment campaign, it may therefore be worth looking around your existing team.

The skills your business needs next could already be sitting within it.