Britain’s employers are being urged to “grow their own” after researchers at Cranfield School of Management discovered that investing in training not only saves money but is more effective than shopping around for talent.

The findings, to be published tomorrow, back up the recent plea from senior businessmen and union leaders for employers to resist cutting training budgets when business turns down.

The report, Nurturing Talent, is the first to compare the impact of recruiting externally with that of developing employees. Three quarters of the 1,189 companies involved in the study felt that training their own staff was more beneficial to their business than recruiting people from outside.

Half the companies discovered that training staff made them more likely to stay. One-third found it increased staff motivation, and almost half actually saved money in the process.

Emma Parry, senior research fellow at Cranfield, who wrote the report, said: “With training budgets often the first to go in a recession, this research demonstrates that growing your own is an effective way for organisations to obtain the skills that they need while saving money.

“I wasn’t surprised by the findings, but it is nice to have the evidence,” she said, adding that it made sense that money spent on headhunters, recruitment firms and time-consuming selection proc-esses could often be better spent on existing staff.

“It also helps staff retention because staff are more likely to stay if they are being developed. They are more committed and are more likely to go the extra mile if they feel the company is helping them to expand their skills,” she said.

Parry added that the problem was that companies often didn’t see the value of investing in training until it was too late. “Sometimes training is seen as nonessential, and when budgets get tight, companies start to look at what they can save money on. But to be honest, cutting training is a false economy.”

Sarah Jones, chief executive of Ufi, the organisation responsible for Learndirect and Learndirect Business, which commissioned the report, said: “Organisations must focus on nurturing talent if they are to survive, grow and succeed. The continuous development and growth of people is inextricably linked to business performance.

“The business case for developing staff is compelling. Effective training can reduce staff turnover and absenteeism, improve motivation, increase productivity, and help boost customer satisfaction.”

The report reinforces a plea by some of Britain’s business leaders for employers to resist the temptation to cut spending on staff training. In an open letter published recently, business people including Sir Mike Rake, chairman of BT, Sir Stuart Rose, chairman of Marks & Spencer, Richard Lambert, director-general of the CBI, together with Brendan Barber, general secretary of the TUC, urged employers to sustain or even increase their investment in training, saying: “Now is precisely the time to keep investing in the skills and talents of our people. It is the people we employ who will get us through. When markets are shrinking and order books falling, it is their commitment, productivity and ability to add value that will keep us competitive. Investing now in building new skills will put us in the strongest position as the economy recovers.”

The letter coincided with the launch of the Simplification of Skills in England plan, developed by the UK Commission for Employment and Skills. It aims to make publicly funded training provision more flexible and responsive to business needs by providing employers with one point of contact – a single team of brokers who will advise on the business and training support best suited to their businesses.

A new web-based tool will complement the work of the brokers. Through it, employers will be able to create a skills development plan for their organisation and find out what courses are available.

Peter Mandelson, secretary of state for business, enterprise and regulatory reform, said: “During these difficult times many businesses will look at how to rein in costs. Evidence shows, though, that those that invest in training are less likely to fail. And first-class work-place skills will be key to prospering when the economy turns up. I know people face tough decisions, but I would urge businesses to invest in skills and training to ensure that they are well placed to take advantage of the opportunities when global economic conditions improve.”

Bertram Group, based in Nor-wich, a book wholesaler with 415 employees, gained greatly from retraining. It reviews staff twice a year to discuss what training they might need and with the help of Learndirect Business finds a course to suit them whether they work in the warehouse or the head office.

Caroline Wilson, head of human resources at Bertram, said the tangible results of the scheme included increased staff retention, excellent motivation and a growing reputation as a good employer.

Another company to use the scheme is Mines Rescue of Mans-field. At risk of going out of business as Britain’s mining industry declined, the company retrained its workforce and transformed itself into an international health-and-safety consultancy which, instead of struggling to survive, now has 1,400 customers throughout the world and an £8m turnover.

Mines Rescue’s commercial manager, Andrew Watson, said Learning through Work had transformed the company. “Mines Rescue is a constantly changing business, so tailor-made training that meets the needs of our business is a viable and extremely worthwhile investment.”

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