Mid-sized businesses most productive, Grant Thornton finds

The labour productivity of mid-sized businesses (MSB) in the UK has overtaken that of larger and smaller companies, and the UK average, for the past six years, according to new research from Grant Thornton. 

The research, which analysed productivity over the last 10 years, found that in 2023, the productivity gap by company size was at its most significant since MSB started to “outshine” other segments in 2018. 

In 2023, average annual revenue per employee was 8% higher at MSBs than at larger companies and 13% higher than the UK average for businesses with over 10 employees.  

However, the firm found that these businesses were “not immune to the UK productivity drag”, with productivity issues currently impacting almost every aspect of their business, including their ability to grow, to export, to recruit and retain people, and to train and upskill employees.  

According to Grant Thornton, a lack of funding to invest and increasing levels of staff burnout are currently the “most significant constraints” to productivity. 

There was a dip in those expecting to increase investment in technology, despite almost two thirds expecting to see positive gains in productivity from AI over the next 12 months. The number of businesses planning to invest in their employee wellbeing and skills development also fell slightly compared to February, despite staff burnout being a top concern.  

In addition, a lack of necessary skills was still a “significant” issue for over three quarters of respondents (77%). Digital and data skills were identified as the most in need, along with technical skills. Of those businesses who said they were facing the biggest skills gap in digital, almost one in four (22%) do not currently have training in place to address this, Grant Thornton said.   

Ahead of this summer’s election, 80% of the businesses surveyed claimed to have confidence that the next UK government, of any party, will focus on prioritising long-term solutions to address the nation’s productivity issues.  

Schellion Horn, partner and Economic Consulting lead, Grant Thornton UK, said: “While our research shows that mid-sized businesses have been outperforming larger and smaller businesses in terms of labour productivity for the past few years, they are still facing challenges in improving efficiency. 

“A lack of funding is the biggest hindrance currently, preventing investment in areas that businesses know will help to improve efficiency and output, such as skills development and employee wellbeing. An expected decrease in interest rates later this year may help ease some of this pressure, eventually reducing debt repayments and freeing up some capital.”