Labour productivity levels decline in key SME sectors, report warns
Labour productivity levels have declined in key SME sectors, a new report warns.
According to the latest SME Monitor published by Banking & Payments Federation Ireland (BPFI), there has been a productivity decline of around 29% in construction, and 14% in accommodation and food services.
“If we look at this in a European context the Irish accommodation and food service sector recorded the second steepest decline in labour productivity since 2015 – after the Czech Republic, as well as the third steepest decline in construction – after the Czech Republic and Austria,” said Ali Uğur, chief economist at BPFI.
“These are sectors where SMEs account for 80% and 62% of employment, respectively,” he added.
Mr Uğur said this comes at a time when many SMEs are under increased pressure.
“This is as a result of changes seen in recent years including increases in the minimum wage, the introduction of statutory sick pay, the return to the 13.5% VAT rate in the hospitality sector and repayments for debt warehousing accumulated during Covid-19,” he said.
“Moreover, the introduction of the higher employer PRSI rates this month and the proposed pension auto-enrolment scheme expected to be introduced next year, are likely to further impact businesses, especially SMEs.”
While some of the productivity challenges at individual companies may relate to scale and size, Mr Uğur said he believes addressing skill mismatches both at firm and industry level, as well as training, can help to improve productivity levels.
“Furthermore, capital investment such as improved technology and automation, as well as process enhancements, may be key for some businesses,” he said.
“Ultimately, in order to ensure long-term sustainability, state supports for businesses, and particularly SMEs, need to move from one-off supports subsidising costs to targeted investments,” he added.
Today’s SME monitor shows that the Irish economy has performed well, particularly in the past two years in terms of both output and employment growth.
“The most recent data published by the Central Statistics Office shows that the Irish economy grew by 5% in 2023 in real terms,” said Mr Uğur.
“This is expected to continue, albeit at a slower rate,” he added.
Article S0urce – Labour productivity levels decline in key SME sectors, report warns – RTE
