17 May 2021

Speeding up the snails: how tech can solve the productivity puzzle

By Christopher Lier

Andy Haldane, the Bank of England’s Chief Economist, calls them ‘snails’ – small, over-cautious businesses that are reluctant to adopt new technology and largely responsible for Britain’s sluggish productivity.

To help turbo-charge these mollusc-like companies, Rishi Sunak announced the Help to Grow scheme in March. From Autumn this year, SMEs will be able to get a 50% discount on productivity-enhancing software, worth up to £5,000. This sounds great – boosting our stubborn productivity rates and enabling a nation of startups to grow and innovate. A win-win for British industry.

Well, not quite. Despite all the initial promise of March’s announcement, the overly restrictive criteria around which SMEs will be eligible and what software they can use threaten to undermine it’s potential.

First, the scheme is only open to businesses with between five and 249 employees. This excludes 95% of small businesses in the UK even though microbusinesses with 2 to 5 employees represent the bulk of the ‘long tail’ of inefficient companies and are in the most need of help. It makes no sense to exclude them. Indeed, new research from the Coalition for a Digital Economy (Coadec) shows an expansion to include businesses with 2-249 employees, would result in £66m of gains to gross value added.

Second, the scheme is currently restricted to just three types of software: Customer Relationship Management (CRM), e-commerce and accountancy software. This is highly restrictive and it won’t benefit some of the worst-hit sectors from the pandemic, like retail and hospitality, where rostering and HR solutions have the most impact. If the current selection was expanded to include other valuable tools like lead-generation platforms, HR tools, enterprise resource planning software and electronic payments – there would be a further £1.9bn GVA boost. Together, an expansion of the software available and a reduction to the employee threshold could generate £2.95bn.

To think big we have to start small. That means ensuring all SMEs can access the right productivity tools so they’re able to drive post-pandemic jobs and growth. New apps such as LeadGen, which I co-founded, can help SMEs to grow faster and connect with customers while saving time and money, but at present they are excluded from the discount scheme.

The Government must be bold in its efforts to build back better. We’re on the verge of finally cracking the UK’s decades-long productivity puzzle, but we stand to lose out on these massive gains unless we can successfully encourage SMEs to invest in the technology they need now. Expanding the Help to Grow scheme would do just that.

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Christopher Lier is the Co-Founder and CMO of LeadGen.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.