ProductivityChallenges and opportunities facing the UK

Two reports were launched at the CBI MSB Summit, sponsored by Lloyds Bank.• The UK Productivity Review• Lifting the Trophy:

Scale up insights into the productivity prizeThe event shed light on UK productivity and shared insights on the barriers to growth and the response businesses need to follow.

Key themes emerged: Skills and training, innovation, culture and the example of highly productive, fast-growth scale-ups.

The issues were informed by the results of the EU exit referendum, held two weeks before the summit, meaning the focus on UK growth took on a new urgency.

Productivity in the UK and its ability to compete and the ability of businesses within the UK to compete is even more critical after the results of the 23rd June.”

Sir Charlie Mayfieldauthor of the Productivity Review and Chairman of the John Lewis Partnership.

The needs of business and customers must be at the top of the Government’s negotiation agenda.”

António Horta-OsórioGroup Chief Executive, Lloyds Banking Group.

Productivity

17% below the G7 average1

UK productivity is

Source: HMRC

If we increase productivity, we increase output, we increase competition and we increase prosperity.”

Productivity is about people, scale-ups know how to get the most from their workforce.

António Horta-OsórioGroup Chief Executive, Lloyds Banking Group.

of UK employees work in companies where productivity is below that expected for companies of that size and in that sector

If we improved the productivity of the bottom three quartiles of that group by 10 percentage points, that would add £130bn GVA to the UK economy.2

2/3

How can you boost productivity in your business?

1. Recruit talented people and help them realise their potential.

2. Manage, don’t avoid risk.

3. Understand the best form of finance to grow your business.

4. Be patient – investment is for the long-term.

5. Seek out opportunities to collaborate with peers and external bodies.

6. Broaden your horizons - consider global markets.

Source: HMRC

Innovation

on availability of technology, but 14th on company level adoption3

5thUK ranks

Those that embrace digital technology, make the most of their working capital, invest wisely and explore new markets are in the strongest position for growth.”

Scale-ups are pioneers of disrupting established ways of doing business as a means of boosting productivity.

Tim HintonManaging Director, Mid Markets and SME Banking, Lloyds Banking Group.

42%of audience respondents claimed that lack of time was the main barrier to innovation in their business.4

Innovation doesn’t need to be a huge thing like building a new factory. It’s a state of mind and giving people the space to think differently and permission to fail, is vital.”

Dr Chris Haley, Head of Start-ups and New Technology Research, NESTA.

Source: HMRC

Skills & Training

of audience respondents said that the failure to improve skills in business is the main challenge to the UK increasing its productivity in the next 5 years.5

46%

The Number 1 issue on the agenda of people leading growing businesses, is access to talent and skills – having people with the right education and the right skills who are work-ready today.”

The importance of successfully competing for talent and high quality training is often top of the agenda for scale-up businesses.

Paul DrechslerPresident, CBI.

Apprenticeships are about your long term business investment. It must not be looked on as a chore or a means of getting money back but a genuine business need. Across industry, the workforce is ageing and we have to maintain the skills needed. Apprentices can help create that talent pipeline.”

Brian MarshGroup Health and Safety Manager, Renishaw.

Top 5 ways apprenticeships are brilliant for your business:

1. The average apprenticeship improves productivity by £214 a week.

2. Apprenticeships can help you tackle skill shortages.

3. Learning can be done in your workplace, minimising disruption and maximising impact.

4. They can be tailored to specific job roles, making them flexible to the needs of your business.

5. Apprenticeships can help reduce staff turnover, by increasing employee satisfaction and loyalty.6

Source: HMRC

Culture

of audience members claimed that lack of collaboration was a key driver behind their failure to innovate.7

1/3

Collaboration is key to productivity. Sharing talent can feel risky, but it can help to develop staff which can support progression, empowerment and productivity.”

Fast-growth businesses place huge value on external advice and benchmarks to boost their productivity.

Matthew ThomsonCEO, Fifteen Cornwall.

Carolyn FairbairnDeputy-General, CBI.

Productivity ideas often come from the frontline – people who are doing a job – engaging them, and working alongside them to create really practical ideas.”

Three key factors to boosting efficiency

1. Leadership and management skills.

2. Workplace empowerment and engagement.

3. Innovation in digital and technological practices.8

Source: HMRC

Scale-up potential

Recent evidence highlights that scale-up firms, especially those rapidly increasing sales, have higher productivity rates than other firms.

of fast-growth businesses were responsible for nearly 20% of productivity growth in 2013.9

4%

The challenges in scale-up come in two particular areas. One is the finance of the working capital. If you have the finance available, the challenge then is all about people.”

Scale-ups approach productivity in different ways but continual improvement is always embedded in their culture.

Without addressing the buffers and bottlenecks within their firms, MSBs can struggle to become more productive and achieve greater scale.

Paul DrechslerPresident, CBI.

Scale-up tips:

1. Review management structures.

2. Ensure you review your export strategy regularly.

3. Unlock capacity.

4. Reflect on best practice.

The world has changed and we are changing with it. It is time for business leaders to roll up their sleeves and get stuck into the challenges ahead.”

Carolyn FairbairnDeputy-General, CBI.

Appendix1. Fixing the foundations: Creating a more prosperous nation 2015. (gov.uk/

government/publications/fixing-the-foundations-creating-a-more- prosperous-nation)

2. ‘How good is your business really? Raising our ambitions for business performance’. (howgoodisyourbusinessreally.co.uk/downloads/reports/ how-good-is-your-business-really.pdf)

3. World Economic Forum’s Global Competitiveness Report, 2015-16 (weforum.org/docs/gcr/2015-2016/Global_Competitiveness_ Report_2015-2016.pdf)

4. CBI MSB Summit, London 7th July 2016.

5. CBI MSB Summit, London 7th July 2016.

6. learndirect.com/business/products-and-services/apprenticeships/ what-are-the-benefits-of-apprenticeships-to-your-business/

7. CBI MSB Summit, London 7th July 2016.

8. Juergen Maier, Chief Executive, Siemens at CBI MSB Summit, London, 7th July 2016.

9. Office for National Statistics.

For more information:http://business.bankofscotland.co.uk/productivity

Link to productivity report at news.cbi.org.uk/news/new-report-outlines-business-led-solutions-to-raising-productivity/

Link to youtube.com/watch?v=FlhxW0lmCfg

Link to the CBI report at news.cbi.org.uk/cbi-prod/assets/File/pdf/lifting-the-trophy.pdf

For details of the CBI MSB strategy, visit news.cbi.org.uk/business-issues/medium-sized-businesses/

To review your business’ productivity, visit howgoodisyourbusinessreally.co.uk/business-marketplace/

While all reasonable care has been taken to ensure that the information provided is correct, no liability is accepted by Bank of Scotland for any loss or damage caused to any person relying on any statement or omission. This is for information only and should not be relied upon as offering advice for any set of circumstances. Specific advice should always be sought in each instance.

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