Medium-sized firms in UK call for government support

Labour productivity among mid-sized businesses has outshone other market segments for the past six years, according to new research from Grant Thornton. However, since 2022 this has been hampered by a lack of funding to help firms invest – something they hope the future government will help with.

Commonly referred to as the “motor” behind job growth and economic prosperity, mid-sized businesses have survived and thrived in turbulent conditions since 2018. Amid the tumult of the UK’s exit from the EU, the Covid-19 lockdown, and sustained political uncertainty, they have managed to maintain a level of labour productivity which surpasses larger firms – Grant Thornton contends.

The research, which analyses labour productivity levels of UK businesses over the past decade, suggests that mid-sized businesses productivity, when measured as average annual revenue per employee, was 8% higher than at larger companies. It was also 13% higher than the UK average for businesses with more than 10 employees.

However, the researchers also found that the firms had not been immune to the UK productivity drag, with productivity issues currently impacting almost every aspect of their business. This was particularly pronounced in 2022, when productivity growth stalled completely. Exploring why, Grant Thornton’s survey of 620 UK mid-sized firms found that a lack of funding to invest and increasing levels of staff burnout are currently the most significant constraints to productivity.

Reflecting this further, the market’s investment expectations are relatively flat at present. At a time when larger firms are using new technology to supplement their workforce and ease hiring difficulties, there has been a 3% dip in mid-sized businesses expecting to increase investment in technology. At the same time, the number of businesses planning to invest in their employee wellbeing has fallen by 1%, and skills development by 4% in May, when compared to February 2024 – suggesting that the staff burnout issue is unlikely to get better any time soon.

Most firms believe the government should play a greater role in helping to overcome these issues, and preserve the health of the UK’s economy. With an election called for 4 July, 80% of the businesses surveyed claimed to have confidence that the next UK government – which ever parties form that after the election – will focus on prioritising long-term solutions to address the nation’s productivity issues. Meanwhile, investing in high quality skills training is identified as the policy area that MSBs would most like to see the government focus on longer term.

Schellion Horn, economic consulting lead at Grant Thornton UK, said, “A lack of funding is the biggest hinderance currently, preventing investment in areas that businesses know will help to improve efficiency and output, such as skills development and employee wellbeing. Ahead of the election, the major parties have outlined that they are focusing on enhancing the skills and training opportunities available to the country’s workforce. It’s crucial then that the parties listen to what mid-sized businesses, the engine of the UK economy, are saying they need and put forward solutions to address the constraints currently hindering the growth and productivity of a core segment of our economy.”