Analysis of SME productivity performance and drivers during the first three quarters of the pandemic

The productivity performance of SMEs during the pandemic is a topic on which relatively little is known, although it has been possible to engage in informed speculation about likely impacts.

Supported by the Productivity Insights Network, and working with Cardiff University and Oxford Brookes University we undertook econometric analysis looking at factors affecting turnover and productivity using SME Finance Monitor data from the early stages of the pandemic.

Three key messages came out of the analysis, as follows:

  • There were differences in effects on SMEs by region. However, once controlling for other factors (such as industry structure and firm characteristics) there were limited links between region and effects on SMEs.
  • Innovation active firms were found to have been less affected by in the early stages of the pandemic. This may be due to the mindsets of these companies, which means that they have been quicker and more able to adapt in the face of changing circumstances.
  • Unsurprisingly, sector has made a difference, with the services and construction sectors particularly adversely affected and the manufacturing sector less so.

The full report can be found here.