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Push to boost productivity at smaller UK companies


A group of business leaders is launching a new effort to improve the efficiency of small and medium-sized enterprises in an effort to close the large productivity gap between Britain’s most successful companies and the underperforming majority.

The campaign, led by Charlie Mayfield, chairman of the John Lewis Partnership, seeks to get companies “match-fit to compete post-Brexit” by spreading best practice and offering practical tools to advise smaller companies on how to raise their game.

“Getting our businesses to improve their performance to the same level as our international competitors is the biggest economic challenge we face as a country,” said Sir Charlie.

Ever since the financial crisis a decade ago, annual growth in British productivity — output per hour worked — has slumped from roughly 2 per cent to a little above zero. Without this growth, companies do not generate the resources to improve real levels of pay and raise living standards.

The launch will be held on Monday at the Bank of England and will be attended by its governor, Mark Carney. Mr Carney has previously said that until the puzzle over why Britain’s productivity growth has slowed so sharply has been solved, “this economy cannot grow as fast as it used to be able to without generating inflationary pressures”.

The latest productivity figures from the Office for National Statistics showed a growth in output per hour of 0.7 per cent in the fourth quarter of 2017, far above recent rates. However, officials are not yet convinced the better performance in the second half of last year will continue.

Both the BoE’s governor and Andy Haldane, its chief economist, have stressed that part of the answer lies in spreading best practice from leading companies to smaller ones, which account for most of Britain’s employment.

Under the umbrella organisation Be the Business, leaders of 12 big companies will set up a digital platform giving practical advice how to improve productivity and a mentoring programme supported by 100 senior staff from companies including GSK, John Lewis and Siemens.

At the BoE “summit”, the leaders will also expand a new executive education programme for bosses of small companies and a series of tailored programmes for companies to adopt.

One difficulty for Be the Business and some senior BoE officials is that internal research at the central bank has recently shown that the blame for Britain’s productivity slowdown lies with the largest and most successful companies.

While large companies are more successful and get more out of their employees than smaller firms, their ability to improve further has disappeared over the past decade.

Patrick Schneider, one of the BoE’s economists, wrote: “The most productive firms are failing to improve on each other at the same rate as their predecessors did.”

Source: Financial Times