Raising UK competitiveness

This research aims to investigate business challenges in more depth, and what can be done to support more businesses across the UK to become more competitive and productive in future. Productivity growth across the UK has become a significant issue over the last decade or so, stagnating since the 2008 recession, and lagging behind many major international competitors. This slowdown in productivity matters because productivity is the key to driving public revenues and improving long term prosperity and living standards. Whilst broad trends are frequently analysed at a macro level by national Governments, according to international studies[1]lasting productivity improvements in future calls for more employer-led action on the ground and targeted work in local businesses communities to incentivise and motivate more businesses to share lessons, capability and good practice to enhance what they do. 

In November 2017, Be the Business was established to work with businesses and to inspire business-led productivity improvements and build a business-led movement, with more businesses working together to share ideas. Its work with business communities has been based on two fundamental insights: First, that good management and technology practices are a major driver of performance improvement; and second, that whilst the UK is home to some of the most productive firms in the world, the practices that drive success have not been sufficiently diffused and adopted. This research seeks to support Be the Business in their mission and to explore what is needed to boost adoption of management practices and business technologies among Britain’s small to medium sized firms. Given the perception that there have been far fewer studies seeking to understand the mindsets and behaviours of managers and their employees, and what motivates them to become “agents of their own improvement”, a key aim of the research has been to provide new insights into the motivations and behaviours of these firms about how to improve their businesses. 

The report is based on qualitative research carried out with over 30 firms, combined with a quantitative national survey of 1,400 firms. A range of business support experts from the public and private sectors and civil society organisations and bodies have also been interviewed. The research has focused on smaller firms with 10-250 employees, because these businesses typically face bigger obstacles to improvement and have relatively fewer resources than larger firms. The research offers new insights on business performance behaviour, highlights conditions for and against improvement and offers a sense of what further business support might be beneficial to bring productivity benefits.

The survey has shown that whilst many smaller businesses report that improving productivity and efficiency is an important priority, only around a half of businesses measure it, meaning they are unable to benchmark their current performance. This highlights a difference between self-reported performance and observed performance, and undoubtedly is part of the challenge for businesses, who might be seeking to secure productivity-enhancements. Many managers are clearly unable to compare their current performance or management practices with other businesses, and/or to assess the impact of any investments they do make over time.

The research also reveals the difficulties smaller businesses have pursuing management improvements, even when they are motivated to change. Indeed, around a half of smaller businesses state that they are not or are only fairly confident of their ability to identify and implement improvements. In addition, the research shows quite a wide degree of variation in the confidence between different types of businesses. Those least confident in their ability to identify and deliver necessary improvements include: 

- family owned and family managed businesses; 

- those who have seen turnover flat-line or contract; 

- those pursuing low or very low product market strategies; 

- major exporters; 

- SMEs in Northern Ireland, Yorkshire and Humber, London and Wales; and 

- those operating in the Retail, distribution, hospitality, ICT and construction industry. 

Confidence was also lower for those businesses that: have not invested in improvements over the past 2 years; self-report that they are not very efficient; do not measure productivity; and are interested in information, advice or support to improve business practices. Particular obstacles reported by smaller businesses to securing improvements highlighted the importance of funding and having a talented workforce. 

In contrast, the research also identifies a distinct group of businesses with high levels of confidence, and improvement activity, and a strong appetite to learn, termed “purposeful improvers”.  These firms also differ from their peers in a number of ways including the degree to which: they plan and set targets for their businesses and measure outcomes to see if their plans are on track; and they actively engage their employees; invest in their broader management community, as well as senior leaders.

The research also gives insights into what might work to support businesses to innovate, and modernise their working practices. Whilst it finds that most businesses do not actively seek business advice to improve, for those that do, trusted advisers and/or other businesses are seen as the most favourable sources of support, expertise and information. Be the Business has been using the research to guide its work, not only working with individual business leaders but those public and private organisations operating in the business support ecosystem. 

[1] For example see OECD (2015) The future of productivity.