Is UK business productivity falling?

The revenue being generated per employee in the UK has fallen by nearly 25% in the past three years, according to a new report from PricewaterhouseCoopers (PwC).


Many organisations have recruited beyond their needs, the ‘A new vision for growth’ report claims, and this is impacting productivity.


The report studied global organisations and found that workforces need to be managed in a more flexible and intelligent way. Failure to do this could result in businesses struggling to make any long term improvements and inhibit potential growth.


Staffing issues


Part of the issue lies in the recruitment process, with the report suggesting that firms are unaware of how to get the most out of their existing staff.


Recruitment is currently being managed on an external basis in 12.8% of cases – compared to just 10.9% in 2011 – and often at a faster rate than revenue is growing.


This is disrupting productivity and as a result revenue per full time employee is now at levels last noted in 2008.


Some companies could consider business turnaround to improve the situation, while a strategic assessment could help identify areas of unnecessary spending. This could even require the need to reduce staff numbers should productivity decline significantly and no other solution be available.


Tracking revenue


At the height of the recession, the UK PLCs’ revenue per full time employee was £104,000. This rose to £139,000 in 2010 after firms reduced staff levels but the figure has since fallen back to £108,000 as company’s recruit at rapid rates.


The report suggests that businesses are rushing into new staff recruitment despite the fact that extra employees may not actually be required.


Among some of the incentives that could boost productivity include offering flexible working conditions and providing incentives to staff. Calculating if staff are required is also important in ensuring that the wage bill is not increased unnecessarily.


The PwC report estimates that such a move could potentially boost profits by thousands of pounds, provided that strategies are implemented at an early stage.


By Phil Smith


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