The word "productivity" featured eight times in the Chancellor's recent Autumn Budget speech (and no less than 54 times in the supporting papers) underlining the importance the UK Government is placing on improving this key measure of economic performance.
Improvements in productivity happen when resources within businesses and across the economy as a whole are being utilised more efficiently than they were previously. This can be the result of investment in research and development (R&D), technological improvements and generally more efficient allocation of resources within a business.
Spending on R&D by businesses has proved more resilient than other forms of business investment through the pandemic, and technology adoption has been faster and greater over the last 18 months. All of this points to a boost in productivity in the medium term.
That's good news because it should mean improvements in turnover and profits for the businesses that have made these investments, higher wages for the people that work for them, and improved GDP for the country.
The UK is far from uniform when it comes to productivity. For example, knowledge intensive services are, on average, around 60% more productive in London compared to the rest of the UK, and London and the South East are the only two places with productivity above the UK average. The economists say that increasing the productivity of the eight largest city regions outside of London and Edinburgh to match the UK average would increase UK GDP in aggregate by around 2%. That's a prize worth fighting for.
To help drive economic growth, the government is investing in three main growth pillars: infrastructure, skills and innovation.
These can be taken down to an individual business level if we interpret infrastructure as technology and plant and machinery.
Investments in plant & machinery and technology can all be funded under the Recovery Loan Scheme, which has now been extended until June 2022. We have a separate blog on the Recovery Loan Scheme with all the details. Check it out if it's of interest.
Every business can invest in upskilling its leadership and workforce without necessarily having to put its hand in its pocket. Internal mentoring and coaching can go a long way towards transferring knowledge within the organisation. Judicious use of free online resources can act as a substitute for expensive courses, and even creating time for reading can help employees stay up to date with the latest developments in their industry.
Government support is available through the Help to Grow Schemes announced at the Spring Budget. There is industry-led management training and networking available in over 20 business schools across the UK for only £750, and impartial, high-quality advice on how to use productivity-enhancing technology, including a 50% discount on approved software worth up to £5,000.
The £3,000 apprentice hiring incentive for employers is in place until 31 January 2022.
Firms participating in UK Research and Innovation funded projects have been shown to grow employment and sales around 25% faster over six years than comparable firms, so it's no surprise that the Government remains fully behind these schemes and is increasing BEIS’s funding for R&D to £14.2bn per annum by 2024-25. There are literally hundreds of industry specific grants available alongside the more generic 'Smart' grants. Firms like Granted and Grant Tree can help you navigate the options and help you with your application.
The great advantage of a grant is you don't have to pay it back!
Here at Productivity Finance, our mission is to help businesses access the funding they need to improve their productivity. If any of the topics covered in this article are of interest to you, please get in touch.
Photo by Andreas Klassen on Unsplash