13th July 2018
The Government is reaching out to try to understand the cause of and solutions for the UK "productivity puzzle". Newable has some ideas...
Productivity is a measure of effeciency. Achieving more, not so much by doing less, but by working smarter. The government is keen on productivity because it is key to ensuring that living standards rise.
However, the UK has a problem. Since the financial crisis there has been very little growth in productivity. We now lag far behind our competitors. An oft used stat is that a worker in France delivers the same output by Thursday lunchtime that an English worker does by the end of Friday. This is not to say that the UK workforce is slow or lazy, it is just that they are unproductive.
Leaving aside the vexed subject of what is being measured and how it is being measured, even if the numbers are directionally right, then the UK economy has a big problem.
Analysis by the Bank of England's Andy Haldane shows that the UK has some of the most productive companies in the world. These tend to be the high tech, "born global" businesses in which Newable Private Investing would typically invest in. The real issue is that Britain also has a very "long tail" of businesses that aren't innovating or, on the face of it, doing much at all to future proof their business.
Newable was invited to give evidence to the BEIS (Business Energy & Industrial Strategy) Committee on this issue and responded to the Government's Business Productivity review.
In summary, Newable believes that the ‘symptoms’ of constrained productivity is the result of some larger and significant causes. For small businesses, these are around access to finance, access to opportunity, and access to support. Positive intervention by government in these three areas is required in order to cure the symptoms and unlock productivity gains.
Newable has three main recommendtions:
- that the government takes substantive measures to increase the availability of SME finance - adhering to Responsible Finance principles - so that SMEs have the resources to invest in developing their business to improve their productivity.
- that the government introduces measures which genuinely enable unfettered access to corporate and public sector supply chains and ensure that the payment terms are equitable.
- that the government reforms the current "patchwork quilt" of SME business advice and creates a domestic version of the DIT's international trade advisory service with a specific focus on helping the long tail improve productivity.
Newable's detailed response can be viewed here. Productivity Report