As productivity takes centre stage in Canberra this week, new research from ScotPac highlights how mounting productivity challenges are weighing on Australia’s SME sector, and why urgent action is needed.

According to early insights from the September release of ScotPac’s bi-annual SME Growth Index (SMEGI) Report, more than one in five SMEs (21%) say productivity barriers are driving up wage costs and holding back innovation and growth. Metropolitan businesses – which contribute 75-80% of national GDP – are especially affected, with 24% reporting productivity linked payroll impacts compared to 14% of regional businesses.

Other prominent impacts of productivity constraints reported by Australian SMEs include:

  • Hiring delays or postponements (16%)
  • Lack of agility — unable to quickly change direction (14%)
  • Lower profitability (13%)
  • Reduced competitiveness (8% overall, climbing to 16% for regional SMEs)
  • Delayed expansion plans (5%)

Closing the Productivity Gap – A National Opportunity

ScotPac CEO, Jon Sutton has called for urgent action to put SME productivity at the heart of this week’s Economic Roundtable.

Recent analysis from the Productivity Commission has found that while SMEs account for more than half of Australia’s GDP, they lag large firms in productivity performance by around 50% – broadly consistent with other OECD member nations.

The Institute of Public Accountants (IPA) has analysed the key barriers to improving SME productivity. They include government regulation and red tape, ongoing skills gaps, and the slow adoption of technology, either due to cost or uncertainty.

“A strong and productive SME sector is fundamental to a healthy national economy,” Mr Sutton said. “Yet the heavy regulatory burden faced by small and medium-sized businesses is eroding margins, holding back investment, and stifling innovation.

“Closing the productivity gap between SMEs and larger firms is both achievable and essential. It should be a top priority for policymakers this week.

“Achieving this will require sensible, supportive government settings – cutting red tape, incentivising skills development, and encouraging investment in innovation.

“With the right conditions in place, SMEs can redirect their energy toward growth and performance, strengthening their role as the backbone of Australia’s economy.”

In the United States, McKinsey & Company estimates that adopting AI and other automation technologies could add up to 3.4 percentage points to annual productivity growth.

Mr Sutton said the Economic Roundtable should consider strategies to harness SME investment in ways that enhance productive output, rather than persisting with barriers that dampen innovation.

“The fact that 60% of Australian SMEs plan to invest in their business in the next six months is a significant opportunity,” Mr Sutton said. “Policymakers should act decisively to support and leverage this wave of investment for the national good.

“Over our 35-year history, ScotPac has helped thousands of Australian SMEs unlock working capital and invest for growth. With the broadest range of customisable finance solutions, our mission is to ensure SMEs have everything they need to maximise productivity and drive Australia’s economic future,” Mr Sutton said.

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About the SME Growth Index

Commencing in March 2014, ScotPac’s twice-yearly SME Growth Index is Australia’s longest-running research report on SME sentiment towards revenue growth prospects.

The Round 23 research was conducted by East & Partners who interviewed 724 SME enterprises with annual revenues of A$1-20 million.

SMEs surveyed have operated continuously for an average of 16 years and manage, on average, 53 full-time employees.

Sectors represented in the survey included Property & Business Services (13%), Manufacturing (13%), Wholesale (12%), Retail (11%), Transport & Storage (10%), Personal & Other Services (10%), Construction (10%) and other industries including Mining & Resources, Agriculture, Media & Telco, Accommodation, Cafes & Restaurants, Finance & Insurance (non-bank) and Electricity, Gas & Water.

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ScotPac is Australia and New Zealand’s largest non-bank SME business lender, providing funding to small, medium and large businesses from start-ups to enterprises exceeding $1 billion in revenues. For over 35 years, ScotPac has helped thousands of business owners succeed, offering fast and flexible funding. From simple to complex, small to large, start-up, growth or turnaround – ScotPac can help with a range of funding including Invoice Finance, Trade Finance, Asset Finance and Business Loans. ScotPac was recently awarded The Adviser Magazine’s Debtor Finance Loan of the Year for a sixth time.

 

For more information contact:

 

Todd Hayward
Mob: 0412 205 151