UK productivity trails G7 competitors
Whilst improving productivity in the UK remains one of the main goals of the Governments Industrial Strategy, the productivity measure of GDP per hour in Q1 2018 was 19% below the 2008 pre-crisis trend level. The UK is trailing almost all the G7 nations at sixth place out of seven.
Only a few SME’s are capable of significant growth
Businesses with less than 250 employees account for over 99% of private sector business in the UK, 66% of all private sector employment and 73% of all net private sector job creation. However, many of these businesses are only focused on remaining in business. They do not have significant growth ambitions, they are not high growth businesses seeking to step change their productivity. Only 6% of these businesses who employ more than 10 people can be characterised as high growth firms and 1% of these businesses account for 20% of job creation.
Three main barriers to growth
Three barriers to productivity improvements: First, identifying the potential high growth businesses so that they can be supported; Second, access to funding for these high growth firms is proving difficult, UK investors are more reluctant than their counterparts to make equity investments in relatively high-risk SME’s; and Third, there is a causal relationship between poor UK management practices and poor productivity.
Access to funding is holding back productivity growth
Access to funding is thought to explain about 18% of the relative productivity gap. Four banks in the UK account for 80% of the SME loan market so competition is limited. Most SME’s fund their activities through a combination of overdrafts (42%) and credit cards (40%). UK SME’s use less equity from third parties than their G7 counterparts.
Poor UK management practices are a significant barrier to growth
Poor management practices account for a whopping 55% of the relative productivity gap. The main reasons are an inadequate supply of quality managerial capital; inadequate worker skills; and a lack of knowledge of what changes to make in order to improve productivity.
Management really matters
Research studies over 15 years and involving 12,000 businesses across 34 countries shows that upper decile companies are twice as productive as the lowest decile equivalent. UK businesses do not invest as much in job training as their European counterparts.
How we can help
Our team of consultants with their experience and rigorous analysis can help “make ready” ambitious SME’s willing and capable of growth. We have a multi-disciplinary group of experts who can address a wide range of challenges. We have a track record of enabling and delivering growth across a range of businesses and sectors.
We can help access to funding
Our team includes experienced FD’s who can conduct financial health checks; working with colleagues they can develop and help implement improvement plans; get clients investor ready, and help with introductions to sources of funding.
We can help improve management practices
An experienced team of improvement consultants; can help benchmark your business; develop improvement plans, and engage experts with the skills and knowledge to enable and embed improvement in the key areas.
Learn more and get some help
If you are an ambitious SME and want to learn more about how we can help you improve your productivity and grow, then get in touch for a confidential no obligation discovery conversation.