Improving productivity and competitiveness is a major challenge for the Welsh economy. The reality is that for many SMEs are not focused on productivity improvement alone. Their attention is often on survival, and the link between the two is not always recognised. They are thinking about paying wages, managing cash flow, dealing with rising costs and trying to make decisions in a uncertain environment.
When I am talking with an SME owner and ask about productivity, you will rarely get a discussion about GVA per hour worked. You will have a discussion about whether they can afford to invest, whether they can recruit, and whether they can keep going.
It is only a few who will have an eye on how small efforts to increase productivity could have a positive impact on all of those very fundamental issues.
If productivity across the nation is going to improve, it has to be something that everyone can understand, measure and act on. At the moment, it often is not.
One issue which does come up time and time again when working with SMEs is speed.
Productivity is, at its simplest, about how effectively resources are used to create value. A resource that is often overlooked time. And across the Welsh economy, too much time is lost. It is lost in slow decision-making, in delayed investment, in waiting for approvals, in navigating processes that should be straightforward but are not.
Although often framed as a public sector issue, where it does play a part, the reality is that it extends across the entire system. Businesses wait for decisions from customers, from suppliers, from funders. Opportunities are missed not because they are not identified, but because the system cannot respond quickly enough.
If we want to improve productivity, we need to get better at making decisions and acting on them at speed.
That applies at every level. At a policy level, it means ensuring that funding moves through the system efficiently and that decisions are made in a timeframe that matches the pace of business. At a business level, it means building the capability to assess opportunities, make informed decisions and execute them without unnecessary delay.
There is also a significant opportunity in how we support businesses to understand their own performance. Many SMEs do not need complex frameworks or detailed economic models. They need simple, practical tools that help them answer basic questions. How productive am I compared to others in my sector? What return am I getting from this investment? What could I do differently to improve?
When businesses can see that clearly, behaviour starts to change.
It is important to recognise that for many productivity gains do not only require large-scale transformation. They can come from small, incremental improvements such as streamlined management practices, clearer processes, more effective use of time and removing unnecessary steps in how work is done.
These are not headline-grabbing changes, but they are the ones that make a real difference on the ground.
There is a tendency in debates around productivity to look for a single solution – a new policy, a new strategy, a new sector to back. The reality is more complex than that. Productivity improvement comes from a combination of factors, and it requires action at multiple levels.
But if we are looking for a place to start, we could do worse than focusing on the points of friction that exist today.
Every business knows where those points are. They are the frustrations that slow things down, that make processes harder than they need to be, and that get in the way of progress. If we can work collectively and systematically remove those barriers, we will see an immediate impact.
We need to focus by making it easier for businesses to operate, to make decisions, to access finance and to grow. If we can do that, I believe productivity will follow.
