7 drivers that could boost UK productivity

The UK currently faces a large and longstanding productivity challenge. When the economic crisis hit, productivity fell sharply, as in other countries. However, while productivity has rebounded elsewhere, the UK continues to lag behind. 

Recent FSB research shows that small firms’ productivity levels finally began to turn a corner at the end of 2014, but there is still a long way to go. UK productivity levels are currently 17 per cent lower than the G7 average. 

“The UK’s comparatively poor level of productivity is one of the biggest challenges facing our economy. We have a lot of catching up to do in order to keep pace with other leading economies,” commented Annemarie Morris MP, chair of the All Party Parliamentary Small Business Group.

“This report has identified a number of practical recommendations that could be taken up by the next Government. Solving the UK productivity puzzle is critical to helping employers increase wages and boosting the long-term wealth and prosperity of the nation.”

A new report published by the All Party Parliamentary Small Business Group and supported by the Federation of Small Businesses identifies seven drivers to boost UK productivity. 

The report’s recommendations are designed to help close the productivity gap between the UK and other G7 countries like France, Germany and the US. 

Here are the seven drivers to boost the productivity of small businesses:   

1. Incentivise business investment

Simplifying the business tax system, setting the Annual Investment Allowance and other investment incentives at attractive and stable levels, and improving access to finance will encourage more firms to invest in new products and processes. This in turn will drive productivity gains and business growth. 

2. Universal access to high quality, affordable broadband

Digital technologies are fundamentally altering the nature of business, and firms that aren’t connected will struggle to grow and even survive. Better broadband for small businesses is essential if the UK is to compete in high-value global markets and close the productivity gap with our competitors. 

3. Invest in regional growth

Investment should be targeted on infrastructure to connect regions and create new opportunities for local firms, while Local Enterprise Partnerships need to be strengthened and made more locally accountable if they are to become better agents of economic growth in England 

4. Support innovative businesses

To help knowledge transfer to the private sector government should increase the Higher Education and Innovation fund to £250m. The application process for businesses to access tax credits for research and development should be improved, and equity investment, which is beneficial to these businesses, should be promoted. 

5. Address skills and training shortfalls 

Government and business should work together to increase the number of high quality apprenticeships, forge closer links with local schools and universities, and encourage more small firms to invest in training to up-skill their workforce. 

6. Ambitious public procurement policy 

We need to see more small businesses bidding for and winning public sector contracts to drive competition and innovation, and deliver new growth opportunities for local firms. The National Audit Office should publish regular performance data on the number and value of public contracts going to small, medium and micro-firms. 

7. Get more businesses exporting

UK Trade and Investment should be supported for the long-term so it can adequately support small and start-up businesses’ ambitions to export, while the British Business Bank should also play a greater role in providing tailored export finance to small firms. 

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