Spatial Variations in SME Productivity

The Industrial Strategy identifies that the UK’s productivity lags that of comparable countries, and seeks to realise improvements across all regions and types of localities, with a strong emphasis on small businesses and entrepreneurship (HM Government, 2017). Evidence suggests that productivity is significantly lower outside of London and the south-east (LSE) region, with the Northern Powerhouse (NP) and Midlands Engine (ME) initiatives seeking to address this productivity gap. Productivity in rural areas also lags urban areas, at the UK aggregate level. However, further understanding of the causes of spatial variations in productivity is required; as McCann (2018, p.15) notes ‘it is this geographical aspect of the UK’s productivity performance about which we probably know the least’. Specifically, initial evidence on spatial variations in productivity pose the question as to what extent are they the result of structural issues (e.g. too many firms in low productivity sectors in particular localities) or whether after controlling for sector, age and other profile variables, does the productivity of firms in the NP, ME and rural locations continue to lag. To address this we undertake three phases of research, analysing: • Variations in small business productivity between NP, ME and LSE regions; • Urban-rural variations in productivity; • Determinants of variations in small business productivity.