Focus on Cash Flow Could Boost Lagging Productivity

15th May 2018.

While productivity in the UK grew in the final two quarters of 2017, our levels are still trailing behind our international rivals.

Since the 2016 referendum and the decision to cut us away from the European Union, our relationship with neighbour economies has become increasingly competitive. Brexit made Britain immediately vulnerable, with our popularity and the popularity of our exports put at risk. Our division from Europe has stripped away some of our armour, and only by focusing our attention on strengthening our economy can we keep ourselves protected.

The referendum brought with it months of political uncertainty, with the government’s timidity with Brussels producing slow results. Consequently British business suffered, with migrant workers returning to countries of origin when their residential status no longer looked certain. Sectors such as construction and manufacturing were hit hard by the departure of skilled hands, and some are still suffering the effects of skill shortages. Productivity has also spluttered, with many employees reluctant to commit to a business where future prospects are so murky.

Finally, both the political and economic landscape has brightened. Inflation has fallen, an interest rate hike has been avoided, wage growth has accelerated, and future prospects generally look more hopeful. According to a survey conducted by Be the Business, an industry-led organisation, UK productivity grew by 0.9 percent and 0.7 percent in the final two quarters of 2017, the strongest growth since 2011. However, the same survey also found that the UK’s output per hour is still around a quarter behind competitors like France and Germany, meaning despite our best efforts we’re struggling to keep up with the rest.

Low productivity does not only affect the economic power of the UK, but also the profits and prosperity of individual businesses. It can easily be improved however with a refocus on cash flow, with more efficient equipment and technology improving the speed and enthusiasm of employees. At the Credit Protection Association, our debt recovery services free up cash flow for our members, affording them opportunities to invest in new technology or even training and management schemes.

“The UK has a long way to go in order to catch up with our European neighbours,” said Tony Danker, chief executive of Be the Business, an industry-led organisation created to help close the UK’s productivity gap.

“With less than a year to go before we leave the EU, bosses must start now to make the most of the opportunities it presents and make Britain’s economy the most competitive in Europe.”

“Evidence shows that business leaders consistently overestimate the performance of their businesses, and Brexit will only increase the demand for our firms to be more competitive,” Mr Danker added.

In contrast, confidence among businesses, particularly those that export, reached its highest level for two years in the second quarter of 2018, according to the latest Business Confidence Monitor from the Institute of Chartered Accountants in England and Wales.

“There is definitely a sense of ‘the joy of spring’ in this quarter’s figures,” said Michael Izza, chief executive of the ICAEW. “Export and domestic sales growth are both improving and businesses are controlling price inflation and labour costs.” Mr Izza warned, however, that bosses were struggling with a tide of rules and new legislation, including the gender pay gap and data protection regulations.

Mr Izza saw staff turnover was another area of concern, cited as a major problem by the construction and business services sectors.

The political, economic and emotional landscape since the referendum has been shaky at best. Our trade deficit widened by £3.4 billion in 2018, with the UK historically importing more goods than exports. This figure will no doubt widen the closer we get to the Brexit deadline next May, and we could see demand for our product diminish further.

The easiest way to improve our image, and harden our competitive edge to rivals is to ensure our economy and businesses are trading as efficiently as possible. Credit management and debt collection companies are monumental to attaining this, as they encourage conscientious management of finances.

At the Credit Protection Association, not only are we a debt recovery company or a credit management company; we are both. The collaboration between debt collection and credit management free up cash flow while providing the credit checks and company directories to keep our members financially confident.