Use Budget to stop productivity rot, says FSB

The productivity of UK workers has fallen for the second quarter in a row in a trend that the Office for National Statistics (ONS) has called a "productivity puzzle".

Hourly output fell 0.1% from April to June, following a 0.5% decline in the first quarter of 2017 according to the ONS. UK productivity lags behind the many countries including the US, France and Germany.

Responding to the news, Mike Cherry, national chairman of the Federation of Small Businesses (FSB), said: "It's troubling to see sluggish productivity serving as such a persistent barrier to UK growth. The chancellor must intervene to stop the productivity rot at the Autumn Budget.

"It's particularly striking to see manufacturers, often touted as the great beneficiaries of a weakened pound post-Brexit, seeing such a marked fall in output per hour. No doubt spiralling input costs are starting to weigh on the sector. The introduction of export vouchers, simplification of R&D tax credits and expansion of the Small Business Research Initiative would provide a much-needed boost to the industry."

Cherry said small firms need greater clarity about the future. "More than seven in ten are not expecting to increase investment over the coming quarter. It's hard to blame them when guarantees about a post-Brexit transition period and the future of EU workers have not been forthcoming. We look forward to seeing the pieces for solving the productivity puzzle emerge in an ambitious industrial strategy that has small firms at its heart."

According to the FSB, one in eight small firms currently plans to close, sell or hand on their business. Cherry said: "The chancellor must steer clear of removing any of the entrepreneurial reliefs that serve as vital lifelines to our risk-takers. Equally, simplification, not expansion, of the tax regime at the Budget will be critical to boosting productivity in the long-term."

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