The study found that while most employers want to address the perceived lack of skills among workers, many said they do not have the time or budget to do so.
In the study of more than 1,000 British SMEs, 61% said there is a shortage of skills in their workforce.
Budget constraints were cited as the main reason for not developing skills, while more than a third (35%) blamed time pressures.
Of the SMEs that identified a skills gap, 95% said it has had a detrimental impact on their business.
SME and mid market banking managing director David Oldfield said investment in skills needs to be the top priority.
"Given the recent economic headwinds that British business have had to endure it is understandable why some have not been able to make skills development a priority, but if they are to reach future potential growth they'd be wise to consider doing so now," said Oldfield.
Despite SMEs' concerns a lack of skills could impact productivity and growth, 80% have not increased their investment in skills development over the past year.
"It is clear some SMEs are not taking action even when they have identified a skills gap," said Oldfield.
"Clearly there are some significant hurdles but it is crucial businesses do everything they can to develop skills across their workforces in order to position themselves for future growth."
The report showed SMEs spend on average around £900 a year per employee on skills development.
More than a third (36%) of SMEs spends at least £500 or more a year per employee, one in six (17%) spend between £500-£1,000, and one in seven (14%) spends between £1,000 - £5,000 per year.
The report found despite SMEs concerns that a lack of skills could impact productivity and growth potential, 80% have not increased their investment in skills development over the past year.