Unlocking the ‘productivity puzzle'

30 October, 2015

According to the findings, in London and the South East 73 per cent of respondents are planning to increase spending on developing their people in a bid to unlock the ‘productivity puzzle'. The figure is slightly higher than the national response of 71 per cent. This outstrips the desire from companies to achieve productivity gains through increased investment in new capital and machinery (64 per cent) or implementing computer software and systems (61 per cent). Skills were a strong theme throughout this report, with 71 per cent and 62 per cent of manufacturers in the London and South East regions stating that the skills of their management teams and non-managers respectively supported their growth. Stephen Peacock, head of the Business Growth Service, said recently: "The race to improve productivity has been widely discussed over the past 12 months and the findings of the Manufacturing Barometer clearly show that the majority of smaller manufacturers are prepared to increase spending to gain better performance.”

He continued: What is perhaps a little surprising is that increasing investment in skills is seen as a greater priority than capital and machinery. This shows the importance firms appear to be placing on ensuring they have the right people to grow their business and this spans from retaining key staff and employing apprentices, to continuously improving existing employees." Peacock added: "Our business growth managers on the ground are also reporting a rise in the number of manufacturers requesting support for leadership and management training to help with strategy, succession planning and entering new markets. This is something we can provide funding for through the Business Growth Service."

The Manufacturing Barometer is the largest survey of its kind, reflecting the views of 529 senior leaders running SME manufacturers across England, employing approximately 16,000 people. The findings reinforce recent economic data highlighting a general softening in the marketplace, with indicators - including predicted sales turnover increases in the next six months – falling back to the same level seen two years ago. Half of firms in London and the South East reported an increase in sales over the past six months, with 68 per cent companies expecting to see an increase in their sales between now and the end of the year. The appetite for new machinery and premises fell by 5 per cent, whilst spend on new technology is expected to increase by 44 per cent in the next 6 months.

One thing’s for sure; in an economic environment that continues to appear uncertain in certain respects – such as the falling price of oil and the slowing down of the Chinese economy, it is imperative that businesses seek the best routes to bolster growth and protect themselves against market vicissitudes that may loom around the corner. As Peacock points out, this concern naturally cascades its way down the manufacturing supply chain and the smaller firms need to plan ahead to make sure they can cope with all scenarios, whether there is a general slowdown, delays on orders or sudden increases in volume as market confidence returns.