| Finance
Agriculture sector loses out on £ 820 million a year due to productivity gap
NatWest today unveils research, conducted by Cebr, which reveals SMEs in the Agriculture sector could add up to £ 820 million a year to the UK economy if they introduced a series of productivity improving measures. The UK’ s productivity is under increasing scrutiny following the latest ONS figures, which identified a 0.5 % fall in productivity in the first quarter of the year.
D espite this productivity gap, NatWest’ s research found SMEs in the agriculture sector are uncertain about the actions they need to take to boost business productivity. Even though more than half( 55 %) of SME decision makers in the sector believe improving productivity is important, 45 % don’ t know what productivity means in practice, making it difficult for them to identify the steps to improve.
NatWest’ s research,‘ Addressing the regional and sector productivity gap’, analysed the productivity of SMEs across all industries to identify potential changes firms can make to close the productivity gap. Despite these potential gains, the research identified that Brexit and political uncertainty mean just 20 % of senior decision makers in the agriculture sector see tackling productivity as a key business priority.
To help UK SMEs understand how they can improve productivity, NatWest and Cebr identified the following measures with the biggest impact:
Investment in workplace culture, employee benefits packages and offering rewards for good performance were the measures most likely to have the greatest impact on improving productivity. Despite this, less than a fifth( 17 %)[ iii ] of agriculture SMEs said that they invest in employee benefits above the statutory minimum and only 18 % invest in workplace culture. Similarly, just 12 % offer rewards for good performance, such as a bonus, showing there are significant gains to be made.
When comparing agriculture to other key industries, it is manufacturing which has the most to gain from productivity improving measures, with the potential to add an additional £ 3.9 billion to the economy. In contrast, the legal sector has the least to gain at £ 580mn per annum.
To provide businesses with guidance on how to improve business performance and work towards closing the productivity gap, the bank has teamed up with business mogul Sharmadean Reid and Shaun and Patrick Lynn, from Hockerwood Eggs, to create a Productivity Blueprint, outlining the measures which have the biggest impact on productivity and including tips and advice from other successful small business leaders across the country.
Additionally, NatWest has made available £ 1 billion in additional lending aimed at SMEs looking to boost performance through investment in productivity-improving measures.
Ian Burrow, Head of Agriculture and Renewable Energy, said:“ It’ s crucial that banks, Government, and business leaders tackle the productivity gap head-on. However, from talking to thousands of our farming customers every year, we know that many small to mid-size businesses struggle to understand how to take steps that will make a real difference to their productivity levels. That’ s why we commissioned research to enable us to take a closer look at the productivity landscape and identify best practice advice in this area to share with our customers. This correlates with our Future Fit programme that aims to further our insight and capability, supporting farmers and helping them to become more resilient.”
Patrick Lynn, Hockerwood Eggs, said:“ Running a small business, it’ s always hard to find the headspace to think about business plans beyond your day-to-day, but I think some of the best advice we’ ve received has come from others in the same position. That’ s why I’ ve partnered with NatWest to create this Productivity Blueprint to outline a series of simple steps that any small business owner can consider taking to help their business be the best that it can be.”
Further help can also be found on the NatWest Business Hub launched last month. The Hub provides insight on a wide range of topics, including cashflow, exporting, productivity, e- commerce and keeping safe from scams, to businesses of all sizes and sectors, through editorial articles, videos, podcasts and access to webinars and events.
[ i ] This gives the total potential increase in output from all SME businesses taking significant steps to improve productivity in the agriculture sector. See notes to editors for detail on calculation.
[ ii ] Average difference in annual productivity between businesses which have implemented policies and those which have not implemented the measures but have considered it.
[ iii ] On average across the measures.
[ iv ] Average difference in annual productivity between businesses which have implemented policies and those which have not implemented the measures but have considered it, scaled up for the impact on the whole of the sector in the UK if those businesses which have considered measures, implemented them.
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. farmingmonthly. co. uk July 2018 | Farming Monthly | 45