Peer networks and the UK productivity challenge

The UK has a longstanding productivity challenge; even before the financial crisis labour productivity was on  average 13% higher in the rest of the G7 countries compared to the UK. This ‘Productivity Gap‘ has since  been exacerbated by the UK’s unusually weak productivity growth since the financial crisis in 2007-2008.

The UK’s overall future productivity growth will, in large part, be determined by the performance of individual  businesses. Whilst the UK has some of the most productive businesses in the world, we also have many low  productivity businesses. The current effects of the COVID-19 pandemic combined with the transition into a  new trading environment with the EU has the potential to further disrupt UK productivity but also presents an  opportunity as businesses adapt their business models, create new ways of working and access new  markets.

The 2019, Business Productivity Review found that those businesses that adopt formal management practices  are more likely to achieve higher turnover, employment levels and productivity growth. There is a broad base  of evidence that suggests that businesses that seek external advice or undertake formal training are more  likely to improve their overall business performance.

Whilst there is a large private sector market for advice and training, SMEs report issues with a lack of  awareness of the help available and a lack of trust in the quality of provision. Affordability is also a challenge.

The Business Productivity Review reported that businesses are most likely to look to trusted peers and  professional networks for advice first, often leveraging their networks and existing relationships with  intermediaries to signpost and help them to navigate the business support market. The Business Productivity  Review found that numerous respondents highlighted the complexity, fragmentation and size of the UK  business support market and pointed out this complexity is found in both the public and private sector  business support provision.

Evidence supplied to the review by the OECD supports this previous finding that businesses often prefer to  take advice from trusted sources, and they look to their existing networks – such as their peers or their  accountants – when taking advice. Businesses also usually take advice at trigger points, such as when faced  with challenges requiring change, including both competitive pressures and opportunities.

In addition, there is robust evidence that demonstrates the importance of business managers learning from  peers, particularly in their local area. Peer networks are integral for trusted advice. They help businesses  navigate multiple stages in the business change cycle, can be called on by businesses time and again, and  through structured conversations they can be focused to support the specific issues faced by businesses.

The Business Productivity Review references the PLATO Networking programme operational in Belgium.  The aim of the PLATO Networking scheme is to provide intensive guidance to SME managers by organising  structured meetings between SME managers. One study4found that participation in the scheme was  associated with 2.5% higher labour productivity, another study found that businesses participating in the  network had 5% more assets and 7.4% higher value-added growth.