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SMEs Predict Productivity Gains

Nearly two-thirds (63%) of UK Small and Medium sized companies (SMEs) predict they will increase productivity by an average of 9% over the next  12 to 24 months, according to new research conducted by leading venture capital investor, Albion Ventures.

One in five (19%) of SMEs forecast productivity gains of at least 20%, according to the 2014 Albion Growth Report, which is designed to shed light on the factors that both create and impede growth among UK SMEs.

Improved market conditions, cited by 42% of respondents, is the biggest factor driving SME productivity followed by enhanced technology (13%), better management (13%) and increased skill levels (11%).

On a regional basis, SMEs in the North West of England are most confident about increasing their productivity, with 90% predicting an improvement.  Small businesses in Scotland and Wales are the most bearish about their productivity prospects, scoring 44% and 45% respectively.

The report reveals that three-quarters (74%) of manufacturing businesses are confident of delivering improved productivity, the highest of all business sectors.  The least optimistic are hotels and catering firms, with only 41% forecasting better productivity at a below-average rate of 6%.

Patrick Reeve, Managing Partner at Albion Ventures said: “The economic recovery may have resulted in steep falls in unemployment, but so far there has been little movement in the productivity needle. This research strongly hints that this is about to change, particularly in key sectors such as manufacturing, driven mainly by favourable market conditions.  It is encouraging to see a number of internal factors such as better management and technology also playing a role in encouraging better productivity.” 

Emran Mian Director of Social Market Foundation said: “Small businesses are clearly optimistic about productivity levels and an improvement here will unlock wage growth, which has so far been elusive.  However, predicted productivity gains vary significantly between regions and sectors, which is in line with other key characteristics of this recovery.”

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