Spatial disparities in SME productivity: evidence from the service sectors in England

The main aim of the project is to identify the firm, locality (as captured by local enterprise partnerships [LEPs]) and regional determinants of small and medium-size enterprise (SME) productivity in the service sector. This helps to understand and improve the spatial disparities in productivity of the UK SMEs operating in the service sector for different localities, and evidence-based multilevel regression analysis of how place and productivity interact, with a strong emphasis on service SMEs, was conducted.

Project detail

This project has drawn on the cross-sectional multi-level analysis of SMEs in England from the Longitudinal Small Business Survey (LSBS) for 2015 from the Department for Business, Energy and Industrial Strategy (BEIS). The analysis highlighted significant variations in firm characteristics and LEPs, leading to disparities in SME productivity in the service sector in England. This suggests the need for adequate support at the LEP level, for example, identifying the strongest and weakest LEPs in their productivity performance, which can help develop better place-based strategies for effective usage of government funding that can fairly be distributed across the local economies depending on their productivity needs. Additionally, strengthening the LEPs and their local business networks can be key to sharing knowledge and experience within the LEPs.

Firm-level findings have shown the importance of the survival of family and small businesses in improving productivity, and the need for investments in training and development for all skill levels, particularly at the management level. Further findings suggest the need for investments and improvements of digital infrastructure to enhance business networks and inter- and intra- connectivity of LEPs to address the issues of spatial disparities in the productivity of service SMEs.