A new report by several of the world's leading financial institutions indicates that the productivity gap between Britain and other wealthy nations is growing. UK SMEs may hold the key to bridging this divide, but how can small businesses generate such a huge contribution?
Mind the gap
The UK's productivity has been in decline since 2008, meaning that British workers now produce 30% less per hour than their counterparts in Germany, the US and France. This slump is leaving the country lagging behind other G8 nations.
Research conducted by Goldman Sachs, the British Business Bank and the Enterprise Research Centre (ERC) recently confirmed that small firms are one of the most powerful drivers of economic growth, being responsible for the creation of 60% of all UK private sector jobs and around £1.6trn of revenue.
Professor Mark Hart, ERC Deputy Director and a co-author of the aforementioned report, feels that increased focus on exports and innovation by SMEs could help to address the productivity deficit – this shift could generate as much as £1.5bn within just 12 months.
While many see this potential in the small business sector, informed commentators point out that SMEs can't propel Britain's catch-up unless a better operating environment is created by central government. What does this mean in practice?
Small businesses, big challenges
The obstacles currently faced by SMEs are numerous, and include everything from rising staff costs to increased taxes. In spite of this inherent complexity, however, there are a few clear steps that the UK government could take to help small business owners.
Research and Development (R&D) investment is much higher in other European countries than the UK. German companies recruit over 200 more R&D bosses per 100,000 employees than their UK equivalents. Likewise, analysts argue that Britain's SMEs are plagued by mediocre management: both of these issues could be rectified by Westminster R&D subsidies and increased focus on skills-based education.
While top-down support is likely to be most effective in shrinking the productivity gap, small business owners can also acquire money to invest in R&D by eliminating debt write-off. If you're an SME boss who'd like to free up cash, contact Dukes Bailiffs to discuss how our ethical debt recovery services could help you today.