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How The UK Government Can Fix Its Small Business Productivity Puzzle


A new report from the All-Party Parliamentary Group for Entrepreneurship calls on the Government to expand and reform its two flagship schemes for boosting the productivity of Britain’s small- and medium-sized enterprises.

Supporting SMEs Successfully finds that while the Help to Grow schemes have shown promise, they are still falling short of their full potential.

UK labor productivity is in a sorry state. While it grew at 2.7% per annum on average between the 1970s and the 2008 Financial Crisis, since then it has only grown at a rate of 0.5% per annum on average. UK labor productivity is now 23% lower than in the US, and 17% lower than even France and Germany. As author Eamonn Ives said: “Restoring productivity growth to historical trend rates is an economic imperative – for seeing better living standards and shoring up the public finances.”

Kash Ahmed, Head of Business Banking at Virgin Money, who partnered on the report, said: “The UK’s productivity puzzle makes us all poorer. Every day we work with businesses so they can reach their full potential, and we know how important government schemes can be to making that happen.

At the 2021 Budget, Rishi Sunak, then as Chancellor, announced two schemes to boost SME productivity. Help to Grow: Digital subsidizes the cost of digital technologies, and Help to Grow: Management trains small business leaders in how to better manage their firms.

On Help to Grow: Digital, the report argues that more technologies should be made eligible for subsidy. Businesses can currently get discounts on just three types of software – for e-commerce, digital accounting, and customer relationship management (CRM). Experts have called for other software to also qualify for discounts, including for cloud computing, cloud storage, HR tools, and artificial intelligence and machine learning. Previous research shows the potential productivity benefits of these technologies to SMEs, which will only become more important as the economy increasingly digitizes.

The research also found that some tech companies have struggled to engage with the Business Department to get their software approved – often due to overly bureaucratic requirements. This limits the variety of tools available for SMEs to utilize via the scheme.

On Help to Grow: Management, the report highlights how many business leaders believe it is too time-consuming, which has restricted uptake. The management courses require 50 hours, spread over 12 weeks, to complete – a sacrifice many business owners feel they cannot make. The report suggests increasing the flexibility of how they are delivered to open them up to more SMEs – for instance trialing online-only courses, or delivering courses in a more tailored timeframe.

Eamonn Ives says: “There’s a lot to admire about the two Help to Grow schemes, but our research shows that the SMEs they’re designed to help think they’re far from perfect. With a few small changes, however, the Government can ensure that the schemes really do deliver for our entrepreneurs and SMEs – boosting productivity, boosting growth, and boosting Britain.”

Finally, the report argues more should be done to raise awareness of the schemes – with many of the SME owners consulted during the research having no or little knowledge of them. The report suggests a new information campaign could help, and calls on the Government to better communicate the schemes when contracting with SMEs.

Bill Esterson MP, Shadow Minister for Business and Industry, wrote in the foreword for the report that “if Britain is to prosper, addressing our productivity malaise will be essential. “Despite a plethora of strategies, white papers, and budget measures, there’s still much more to do when it comes to solving Britain’s SME productivity puzzle. One big reason for our low productivity is the lack of core skills.” He adds: “We need economic stability to build confidence among investors. We need investment in support for startups and scaleups to deliver the growth and enable smaller firms to create the well paid jobs communities across the country need.”

“Successful economies have partnership at their heart. Partnership between government and business. But support for businesses from private sector organizations is also crucial to the success of businesses and our economy too.”

As Kash Ahmed explains: “We’re always looking for new ways to help businesses thrive, whether that’s through digital innovation or our mentoring programme Levelling Upstarts, so we’re proud to be part of this report as its recommendations could make a real difference for thousands of businesses.”

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