Tech skills shortfall frustrates start-ups looking to hire

Eddie McGoldrick is looking to double his workforce at The Electric Storage Company in Belfast, but hiring a single vacancy can take up to six months.

After notice periods and training, “it could be an entire year before people are fully productive with us”, the chief executive and founder said. “We find that lead time hugely frustrating. We have interviews every week at the moment, and people [often] don’t turn up or decline the offer.”

The company, a tech platform that connects businesses to cheap renewable energy, is one of hundreds of start-ups struggling to hire people with tech expertise, particularly in software engineering, coding and machine learning.

The so-called digital skills gap in the UK, and globally, has been building for years not just because of the growth of tech start-ups, but due to the rapid digitisation of non-tech companies, which need staff to build websites or analyse data.

“There’s a skills shortage because the technological change came so fast, before education could respond,” said Clare Walsh, director of education at the Institute of Analytics. She believes companies need to stop relying on education to provide people with the skills they need.

“Very few other professions actually expect people to leave school ready to go into that profession. We [need to] retrain them and reskill them to do a specific job,” she said.

A poll of small businesses across the UK technology sector by the Department for Education found that 46 per cent of companies ranked a lack of staff with the right skills and difficulties hiring as their top two concerns for this year. Almost 80 per cent of respondents planned to invest in improving the skills of their workforce.

The digital skills gap is not unique to the UK. In the US, Big Tech salaries have risen to hundreds of thousands of dollars, while about a third of the American workforce has limited digital skills, according to the OECD.

European countries such as Spain and France are emerging as new tech hubs, and need staff. India’s IT companies have struggled to meet demand domestically and overseas as they serve companies including BT, Microsoft and Citibank UK.

A particular challenge for smaller tech firms in the UK is that they are recruiting from a shallow pool of candidates and, within that, competing with large tech groups such as Google and Amazon. The intense competition, compounded by a lack of qualified graduates, and inflation, has resulted in salaries rising fast, which smaller tech businesses struggle to match.

UK start-ups have also voiced concerns over the planned changes to research and development tax credits, revealed by Jeremy Hunt, the chancellor, in his Budget last month. They believe the reforms, which will reduce tax credits for companies that spend less than 40 per cent of their costs on research and development, would leave small tech companies with less cash to hire and train existing staff.

The average salary of a computer programmer in the UK is more than £41,000, according to an analysis by Glassdoor, a jobs website. But companies the Financial Times spoke to suggested high-calibre tech workers expected six-figure salaries.

Some tech founders are offering a share of their business to attract staff. David Connor, who now runs an ecommerce company, searched for a UK-based coder for about 18 months to develop an app called PR4NK.

He offered a 26-year-old graduate a 33 per cent stake in the company producing the mobile app in return for developing it in two months, with no other payment. “Most [freelancers] wanted £4,500 per day [and] the only way that a bootstrapping start-up like ours with zero funding was able to get a developer in was by offering equity in the company,” Connor said.

Four months after launching PR4NK, the company behind it was sold for “single-digit millions” and the developer bought his first house.

Some smaller companies are hoping the recent mass redundancies at the largest tech groups would free up more candidates. Over the past few months, Amazon, Google and Meta, which owns Facebook and Instagram, have cut tens of thousands of jobs, including in the UK.

One start-up hoping to benefit from the lay-offs is Hoxton Farms, a London-based company developing animal-free fats to use in food.

“There are more opportunities for us to hire people,” said its co-founder, Ed Steele. “Lots of people who are coming out of companies like Google or Facebook . . . are now looking towards start-ups like [us].” He did, however, warn that finding talented staff was still a challenge.

Tasmin Todd, chief executive of the ancestry website Findmypast, said that even with a bigger pool of recruits — and efforts by the government to teach computer skills and invest in retraining schemes to encourage career moves into tech — the mismatch between demand and skilled workers was “only widening”.

“The need for technology in all kinds of organisations is growing faster than the supply of those people,” she added.

Todd said computer science education in the UK tended to be quite siloed: “You study computer science but not the application of it to different subjects. [And] females, in particular, are not coming into university level study of computer science. We are not opening the funnel as wide as we might in the country, so that creates a problem for businesses.”

Findmypast has funded five women through a three-month computer science course with the training provider Code First Girls to address its shortage. These individuals now work as software engineers at the company.

Others also suggested people coming through short-term education programmes, with little practical experience, did not have sufficient skills.

“The quality of those boot camps is generally quite questionable,” said Chris Goodfellow, chief technology officer at the mortgage tech start-up Acre. “From my experience, they seem to be training people to do interviews rather than how to be developers.”

Acre has focused on hiring junior staff from universities. About half of its 40-strong team are software engineers, and it is trying to attract more.

Goodfellow said the skills gap had led to a quality problem, meaning that “anyone with two years of experience is considered a senior developer” with high salary expectations. It can take months to hire, as well as “a lot of outreach and effort”, he added.

“As a start-up, you do not have the budget to necessarily compete,” he added. “Our biggest thing is to hire for potential . . . and build them up.”

The Electric Storage Company identifies potential hires in their last year or two of higher education, contracting them for when they graduate and offering to make pension contributions while they complete their final year.

McGoldrick, its chief executive, has also tried to attract millennials by allowing them to help to guide the broader business strategy. Younger staff plan events and “set the cultural tone”, he said, whereas “in the bigger machines, they are just another cog”.