Ever since the financial crisis, annual productivity growth decreased to just above zero. While there have been recent signs of revival, it’s still a far cry from the pre-crisis 2%. This shortfall is brought into perspective when compared with other G7 nations.
Why does the UK lag behind? It could be employee morale, which is still underrated when it comes to business priorities. A breatheHR study revealed that 60% of SME leaders believe employee happiness it will drive better levels of customer service and satisfaction, which directly affect the bottom line.
According to Natwest business and premier banking managing director, Marcelino Castrillo, strong employee morale could help SMEs future-proof their growth.
The UK’s output levels are 18 percentage points below the combined average of the other G7 economies. Much of this is due to rising presenteeism and absenteeism, which is said to cost employers on average 27.5 days worth of productivity per employee each year.
Talking to Real Business, Castrillo explained that a lack of technology investment was a drain on efficiency. It was one of the biggest reasons why staff worked longer hours and came into the office when ill to demonstrate they were completing tasks.
It heavily featured in NatWest’s decision to lend an additional £1 billion to SMEs. Investing in helpful tools would speed up the process and remove the small niggles that led to frustrated employees. It also comes hand-in-hand with news that the bank has acquired FreeAgent, a cloud-based accounting software company.
FreeAgent will continue to operate as an independent brand – and maintain its current Edinburgh location – and NatWest aims to wield it by fostering SMEs’ innovation aspirations and boosting productivity by freeing up time and resources.
These are but some of the steps NatWest is taking to go beyond being a mere provider of financial services.
“It will also help SMEs get ahead of ‘Making Tax Digital’, which businesses will need to consider in the coming months,” Castrillo explained. “The partnership will extend the breadth and depth of what we can facilitate and develop for our customers as part of open banking.”
Indeed, since first partnering with FreeAgent in 2017, NatWest has been able to help 15,000 SME bosses manage their accounting needs digitally.
Also, in the long run, if productivity does not increase, it will create a barrier to raising wages without lowering profits.
“It is crucial for improving living standards,” Castrillo maintained. “But there’s more that can go wrong if companies don’t take adequate steps to boost productivity.
“When you struggle to get the job done, you’re more inclined to bail. Low morale will see to it that employees either don’t show up, or can’t focus on the task at hand. SMEs can ill-afford to constantly think of having to replace staff or constantly delivering sub-par projects.
“Low morale can also be just as contagious as the cold an employee brings into work. The resultant pinch will be felt by everyone, and will likely foster tension among the workforce.”
“Aside from keeping staff happy, SME bosses need to think about simplifying business processes. Freeing up their time to get the nitty gritty done will make them feel more accomplished.”
With productivity being cited by NatWest’s clients as one of the biggest bugbears, the bank has been doing all it can to help.
“Our customers don’t always have the time or headspace to plan effectively for the future, which is contributing to low levels of productivity and slow business growth,” Castrillo said. “We strive to support our customers with detailed sectoral knowledge, but we want to do more to help.”
Alongside the CEBR, NatWest will soon be launching research that demonstrates how SMEs could potentially double revenues if productivity were to be improved. It will collect concerns from 2,000 UK SMEs and twist the garnered insight into a practical guide.
There’s a rising awareness among SMEs that high levels of productivity are a necessity, Castrillo explained of the findings. However, many are either unsure of how to pursue that growth or don’t have the time to investigate. That’s where the newly launched Business Hub comes in.
In order to give SMEs more advice on tackling areas of concern, NatWest launched a platform that talks through various topics including cash flow, exporting, e-commerce and how to keep safe from scams, to businesses of all sizes and sectors, through editorial articles, videos, podcasts and access to webinars and events.
Productivity is the focal point of the month. Once you’ve figured out how to save time and money, you can focus on smaller elements such as getting in “the zone” and doing certain tasks first.
One things for certain, Castrillo explained, the so-called productivity puzzle will be solved when everyone piles their learnings together and support each other.