UNDER EMBARGO UNTIL 13 July 2015 08:45

Unlocking productivity key to small business growth, say FSB

Following the publication of the Treasury productivity report: ‘Fixing the foundations: Creating a more prosperous nation’, John Allan, National Chairman, Federation of Small Businesses, said:

“The UK faces a large and longstanding productivity challenge. Closing the productivity gap is the best way to boost the long term health of the UK economy. It’s the key to reducing the budget deficit, delivering higher wages, and improving living standards. Solving the productivity puzzle requires long-term effort and a wide, cross governmental strategic focus which has small business engagement at its heart.

“We need to address issues in planning, energy market reform, infrastructure investment and delivery, improving education and training and increasing access to superfast broadband. Today’s report recognises many of these challenges.

“As we proposed prior to the Budget, the FSB would also like to see further ideas on how the tax system could be made to drive productivity improvements through incentives and simplification. We see the upcoming review of small business taxation by the Office of Tax Simplification as the ideal opportunity to do this.

“Two standout wins for small business in today’s report were the introduction of the Leadership and Management Degree Apprenticeships and the package of measures for small house builders. The FSB has long advocated such reforms to boost productivity. The first recognises the important role vocational training can play in improving the leadership and management skills of tomorrow’s business leaders. The second will be particularly welcome to our members in the construction sector who have long struggled with the UK’s sclerotic planning system.”

In a report commissioned for the APPG for Small Business published in March, the FSB found seven key drivers for improving small business productivity:

1) Incentivise business investment: Simplifying the business tax system, setting the Annual Investment Allowance and other investment incentives at attractive and stable levels, and improving access to finance will encourage more firms to invest in new products and processes. This in turn will drive productivity gains and business growth.

2) Universal access to high quality, affordable broadband: Digital technologies are fundamentally altering the nature of business, and firms that aren’t connected will struggle to grow and even survive. Better broadband for small businesses is essential if the UK is to compete in high-value global markets and close the productivity gap with our competitors.

3) Invest in regional growth: Investment should be targeted on infrastructure to connect regions and create new opportunities for local firms, while Local Enterprise Partnerships need to be strengthened and made more locally accountable if they are to become better agents of economic growth in England.

4) Support innovative businesses: To help knowledge transfer to the private sector Government should increase the Higher Education and Innovation fund to £250 million. The application process for businesses to access tax credits for research and development should be improved, and equity investment, which is beneficial to these businesses, should be promoted.

5) Address skills and training shortfalls: Government and business should work together to increase the number of high quality apprenticeships, forge closer links with local schools and universities, and encourage more small firms to invest in training to upskill their workforce.

6) Ambitious public procurement policy. We need to see more small businesses bidding for and winning public sector contracts to drive competition and innovation, and deliver new growth opportunities for local firms. The National Audit Office should publish regular performance data on the number and value of public contracts going to small, medium and micro-firms.

7) Get more businesses exporting: UK Trade and Investment should be supported for the long-term so it can adequately support small and start-up businesses’ ambitions to export, while the British Business Bank should also play a greater role in providing tailored export finance to small firms.

Media Contacts:
Emma Smailes
07917 628918

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The Federation of Small Businesses is the UK's largest campaigning pressure group promoting and protecting the interests of the self-employed and owners of small firms. Formed in 1974, it now has around 200,000 members across 33 regions and 188 branches.