Seven ways to boost productivity

Tuesday 3 March 2015

Seven ways that productivity can be boosted among small businesses have been put forward in a new report from the All Party Parliamentary Small Business Group.

This report was supported by the Federation of Small Businesses (FSB) and is designed to try close the gap in terms of productivity between the UK and other countries in the G7.

Productivity levels have been an issue since the economic crisis hit, where productivity fell here as it did in other countries. Yet other countries saw a rebound in productivity but the UK continued to lag behind.

At present, the UK is 17 per cent below the average level of productivity for G7 countries. Small firms, such as limited companies and sole traders, did see an improvement in productivity toward the end of 2014, however FSB says that there is still more work to be done.

One of the seven drivers that the report suggested was to incentivise investment in business. It claimed that this could be done by making the tax system more simple, putting investment incentives such as the Annual Investment Allowance at "attractive and stable" levels and helping firms get access to finance. The latter point would help firms to invest in new products and processes. In turn, this would help to improve productivity gains and business growth.

The next point related to improving digital infrastructure by ensuring everyone has access to high quality and affordable broadband. This is because businesses are becoming increasingly dependent on digital technology and those that aren't connected will struggle to grow and survive. Therefore, the report says small businesses need better broadband so that they can be competitive in global markets and close the productivity gap with other countries.

Investment in regional growth was recommended, saying that it should be targeted on infrastructure so that different areas could become better connected. This would create opportunities for local firms. The report suggested that Local Enterprise Partnerships need to be strengthened and that they should become more accountable locally so that they can be better at promoting growth in England.

Support for innovative businesses was called for in the form of increasing the Higher Education and Innovation fund to £250 million. It was also suggested that the application process that allows businesses to access tax credits for research and development should be improved. Promotion of equity investment was also recommended.

The report said that skills and training shortfalls should be addressed and that government and business could work together to increase the number of high quality apprenticeships available.

It was recommended that an ambitious public procurement policy be put in place. The FSB said it wants more small businesses to big for and win public sector contracts, which could help to drive innovation and competition as well as delivering growth opportunities.

UK Trade and Investment should also get support for the long term, according to the report, so that small and start-up businesses ambitions to export can be supported. What's more, the report suggests that the British Business Bank should play a bigger role when it comes to delivering tailored export finance to small firms.

By Victoria McDonnell

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