Small business priorities for a new parliament

Newly-elected MPs heading to Westminster, inboxes no doubt groaning with congratulatory messages and policy briefings, have a busy few weeks (and months) ahead. Moving forward with the first stage of getting Brexit done – the EU Withdrawal Bill – will consume much of parliament’s time at the beginning of 2020. But then what?
It’s the role of the Enterprise Research Centre to frame that question through the lens of Britain’s small businesses. Our research points to three priorities that require a renewed policy focus from the new government – the sustained weakness in productivity; regional disparities in business performance and maximising the benefits of the promised boost to science and innovation funding.
As MPs, Ministers, their researchers and advisors start to consider what measures can best address these challenges and opportunities, we’ve complied an introductory reading list comprising ERC’s latest research and analysis that is designed to be a foundation for evidence-based policy decisions.

What’s behind the productivity problem?

The UK hasn’t seen any growth in productivity (measured by annual growth in output per hour) since the first half of 2018. We need to close the chapter on a lost decade of productivity and use the next parliament to take bolder steps that will ensure we change course.
While simply talking endlessly about productivity hasn’t addressed the problem, ERC research on Understanding value added per employee in six sectors points to a need for more understanding of the sectoral variations in productivity, how they have come about and why they matter.
There are, however, some common productivity challenges for small businesses. One area in which there is agreement about the problem, but rather less consensus on what to do about it is the contribution of management capability to productivity. ERC has taken a deep dive in to the data to look at the causal links between skills and management practices and productivity.
ERC’s State of the Art reviews (SOTAs) bring together the latest academic literature on big policy questions from what have SMEs got against high performance working practices to does inward investment make a difference to local productivity?

What’s happening to local growth?

And speaking of local growth, more local decision-making – a likely consequence of the new electoral map of the UK – requires good local data on what’s happening to businesses on the ground.
ERC has led the LEP data charge with our Local Growth Dashboard, which for the past five years has been producing metrics on business start-ups, growth and productivity across the sub-national geographies of the UK, including the 38 local enterprise partnerships.
The LEP analysis also extends to innovation performance in our report on the innovation geography of the UK.

How to invest in science and innovation?

Innovation has already been identified as a spending priority for the new government, with the Conservative party manifesto stating …
“We are committing to the fastest ever increase in domestic public R&D spending, including in basic science research to meet our target of 2.4 per cent of GDP being spent on R&D across the economy.”

But how to maximise this spend in support of small business growth and productivity? Our SOTA review considers what the literature says about how the right policy mix can drive business innovation.

ERC has also been undertaking an extensive programme of research to understand how small firms innovate, what resources they need to succeed and their knowledge protections strategies. For those considering how to spend the next pound in support of more innovation here are three ‘must reads’:

– Industry 4.0 – a bridge from entrepreneurial ambition to business performance
– University Engagement and Productivity in Innovative SMEs
– The impact of policy support on firms’ innovation outcomes and business performance

And coming up…

At ERC our focus is on building the best evidence in support of policies to promote small businesses across the UK. And in working with our partners, such as the Federation of Small Businesses, UK Finance and NESTA, our research programme in 2020 will help answer some of the big questions facing our economy and small businesses. For example, how can we shore up resilience in SMEs as we exit the EU and what more needs to be done to enhance technology diffusion?
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Lee Hopley – Deputy Director

Please note that the views expressed in this blog belong to the individual blogger and do not represent the official view of the

Enterprise Research Centre, its Funders or Advisory Group.