SW businesses risk getting stuck in 'productivity slow lane'

George Dawson
Authored by George Dawson
Posted Tuesday, November 15, 2016 - 6:20pm

South West businesses are failing to take crucial steps to boost their productivity, according to a new report from Lloyds Banking Group and the Manufacturing Technologies Association.

The report, Understanding the Puzzle, canvasses the views of more than 1,500 businesses across the UK, highlighting a widespread concern about productivity levels in the UK economy and echoing worries that have been raised by Government and industry bodies.

It raises an urgent need for investment in order to prevent UK productivity levels falling far behind other countries.

The report found 62 per cent of South West firms recognise productivity is an issue for the UK economy, but just a third (33 per cent) believe it is a problem for their own businesses.

While 62 per cent say they have a plan in place to improve their productivity, 21 per cent do not have a plan yet, and 17 per cent say have no intention to do so.

Obstacles to productivity growth

South West firms cited a range of other obstacles hindering their productivity growth, led by a shortage of skilled labour, cited by 56 per cent, and concerns over regulation (54 per cent).

Almost half (48 per cent) said that restrictive labour practices was an issue, while 44 per cent cited the quality of management in their business and 42 per cent mentioned inadequate R&D.

Lack of investment

More than half (54 per cent) of South West businesses recognised that their own lack of investment was a significant barrier to improving productivity, but only around two fifths (38 per cent) of respondents plan to increase their investment spending over the next twelve months, while a quarter (25 per cent) are freezing it and around one in ten (8 per cent) are making cuts.

Among those firms that are planning investment, only 20 per cent plan to do so with the specific goal of improving productivity.

The key targets for investment to boost productivity are skills and training (48 per cent); software (36 per cent); production machinery (32 per cent); buildings and infrastructure (20 per cent); automation (18 per cent); emerging technologies (14 per cent) and big data (14 per cent).

Of those considering reigning in investment, half (50 per cent) cite economic uncertainty; 17 per cent feel there is a lack of available skilled labour; 13 per cent worry about the cost of investing; and 13 per cent say they are simply unsure of the benefits any investment would provide.


The study also examines the issue of innovation, which is widely seen as key to increasing productivity.

Almost two fifths (38 per cent) of South West businesses say a lack of innovation is an obstacle to productivity growth for them and that innovation is being stifled by factors including their business’ attitude to risk (21 per cent); a lack of new ideas (17 per cent); their firm’s culture (17 per cent) and a lack of skills (15 per cent).

David Beaumont, regional director for SME banking in the South West at Lloyds Bank Commercial Banking, said: “Productivity is one of the defining economic issues of our time. The UK’s low level of productivity compared to its G7 peers remains an unsolved puzzle, and it is crucial that we seek to understand how businesses view the problem in order that we can try to fix it.”

David added: “South West firms do recognise that productivity is an issue for the wider economy, but this research indicates they are less convinced there is a problem within their own businesses. While many firms do have a plan in place to boost productivity, most are not investing enough to overcome the barriers to productivity growth.  

“It is hard to overstate the importance of productivity growth in securing the economic prosperity of our nation – and we must do everything possible to avoid the risk of getting stuck in the productivity slow lane. That is why - through our Helping Britain Prosper Plan - we are working hard to help our customers grow at home and overseas.”

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