Small business productivity varies wildly across UK regions

Productivity among the UK’s small businesses varies greatly across the nation, with the City of London 26 times more productive than the least productive region.

The report from Sage and Nesta – the innovation foundation – adds that business death rates and numerous local initiatives are all having an impact.

By mapping SME productivity at local authority level, The State of mall Business: Putting UK entrepreneurs on the map study focuses on what gaps exist and why they might be occurring.

London has recorded 41% growth in SME numbers, while the capital and the South East are home to a third of the UK’s small and medium-sized businesses.

Skill availability and connectivity have a major influence on productivity – for instance, the average worker in the most productive region in the City of London is worth £1.45 million in company turnover to their small business, compared to £56,500 in the least productive area.

Areas with high business survival rates had lower productivity than those with high rates of insolvency – the report suggests it backs up the idea that ‘creative destruction’ is good for the economy.

It points to the example of Watford, which displays one of the highest marks of productivity despite having one of the lowest five-year business survival rates.

Another factor is that smaller firms are highly productive in their early years, but then face difficulties and are forced into administration, which in turn causes productivity levels to plummet.

Small businesses are also key drivers of job creation, as they have been responsible for 73% if new private sector jobs since 2010.

The tech sector has also played an important role, with the sector growing by 42% since the start of the decade, compared to 23% for the nation overall in that time.

The education sector also doubled in size while the slowest rates of growth – of just 8% – were witnessed in the construction sector.

Chief Executive at Sage, Stephen Kelly, has said the report needs to serve as a “wake up” to the nation that a one size fits all approach cannot be applied to the UK productivity problem.

By Phil Smith


If you would like to have a free no obligation chat with one of our advisers please call us on 0207 186 1144.

View all Business Insights