UK SMEs face productivity challenges amid rising costs

Small and medium-sized enterprises (SMEs) in the UK are facing significant productivity pressures due to rising costs and tightening margins. Business confidence has reached its lowest level since the pandemic, with nearly 90% of firms reporting higher costs compared to the previous year.

Since 2019, UK output per person has remained flat. The Office for Budget Responsibility recently downgraded its medium-term productivity forecast from 1.3% to 1%. Research indicates that productivity issues often stem from everyday inefficiencies rather than a lack of effort, particularly in firms with fewer than ten staff. For example, Sage research suggests that financial administration shortcomings can cost SMEs an average of 24 days per year.