Businesses risk failing to address productivity shortfalls

A failure to innovate and invest in boosting productivity could be costing British businesses, according to new research from Lloyds Banking Group and the Manufacturing Technologies Association.

The report claims that many firms view low productivity as only an issue for the wider economy and not necessarily for themselves.

More than 1,500 businesses across the UK were questioned for the Understanding the Puzzle report, which comes after industry bodies suggested that productivity in Britain is lagging behind other G7 nations.

The issue is highlighted throughout the report but so too are issues surrounding how the productivity is perceived – while 58% acknowledge that low productivity is a problem, only 25% see it as a problem for their own firm.

A further 21% are unsure of whether it is a problem at all, as they have no way of measuring productivity effectively.

It is being addressed in 60% of cases as firms say they have implemented plans to boost productivity, while 20% do not have one and 20% suggest they will never have one.

A diverse set of obstacles are perceived to be hindering productivity growth, but not all of them can be controlled.

Some 58% said a shortage of skilled labour was a problem while 55% put forward the idea that regulatory frameworks limit what they can do.

Issues surrounding the quality of management staff and poor research and development were also found to be hindering productivity in 47% and 42% of cases respectively.

Investing in productivity was also an issue for half of firms, as they recognised the need for it but were not actively engaged in making it a reality.

Instead many firms are slowing their investment, citing economic uncertainty, costs and a lack of skilled workers as the primary reasons.

Others said they were unsure of what the benefits would be, despite productivity ultimately playing a vital role in driving sales, innovation and overall business growth.

It means that firms with low productivity may face financial risks or even the need for turnaround management practices if issues are allowed to persevere for some time.

Any business with concerns should seek advice at the earliest opportunity in order to limit any potential negative financial impacts.

By Phil Smith

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