The top one per cent of UK firms grew on average by eight per cent each year between 2004 and 2014, while the lower 99 per cent experienced annual productivity growth of less than one per cent over the same period. This is the long tail of UK business productivity which has to be shortened if national productivity is to rise significantly.
But how do we cut this tail.
Well, many of these ‘tail companies’ are small businesses.
The UK government, like most governments, often expresses its commitment to, and support for, small businesses. But they throw these businesses small ‘bones’ of support or comfort occasionally; they rarely construct, much less execute, a coherent and sustained programme of support.
Small businesses rarely ask for much – a favourable tax regime, an absence of bureaucracy and access to finance are their most common requests. Government responds with more regulation and legislation – because that is the business of government.
Governments often seems to want to stifle productivity development. Over the last decade, many have been supporting ‘ailing businesses’, creating ‘zombie’ firms that should have gone to the wall.
All they need to do is to create an environment in which well-run firms can thrive and prosper. Then they need to get out of the way and let those firms get on with it. Some won’t make it – but that is the law of the (business) jungle. It will see the tail reduce.