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Kat Sloan

Management Practices and Productivity in SMEs

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Featured Image: by Andrew Neel on Unsplash  

By Professor Alan Hughes and Professor Martin Spring
Lancaster University

The project

Our exploratory project used qualitative interviews and a pilot survey to investigate management practices and productivity in service and manufacturing in SMEs in North West England

The context of the project 

The stagnation in UK aggregate productivity growth in the past decade and a half has coincided with the growth of a new literature measuring “structured” management practices.

The former has led to much ink being spilt over what productivity is, how it should be measured and whether and how businesses understand it, or should measure it.

“It is a terrible word, as it leaves most people dazed and confused. Few are those who can define it and fewer still those who can measure it” Andy Haldane  Chief Economist Bank of England.[1]

Most discussions of the productivity slowdown, however, begin from a well-developed and widely understood definition of productivity. This is based on national accounting data. It divides  output measured as gross value added (GVA) by a measure of labour inputs (either numbers of employees or employee hours) (see e.g. Barnett[2] We consider whether this approach makes sense to, or can be used by, company management.

Quantifying structured management practices also raises definitional and measurement issues.  The current dominant approach is to use surveys to develop company level scales. These scales focus primarily on the extent to which a business has a consistent and integrated set of practices covering the recruitment, incentivization, review, promotion and dismissal of staff (see e.g. Bloom et al 2017).

This approach also measures the number of key performance indicators used and argues that the more indicators used the better the quality of management practices.

Much has been made of the possibility of improving aggregate productivity growth by increasing the diffusion of structured management best practice across a hypothesised long tail of low productivity firms, and of low productivity small and medium sized family businesses in particular (ONS 2017).

We were concerned that the management practice insights gained from studies of management in larger firms, in the manufacturing sector, had rather too readily been used to draw conclusions about desirable management practices in smaller firms, in both service and manufacturing sectors.

We were also concerned that, while productivity is understood to be a desirable outcome and measurable at an aggregate level in policy circles, it may not be treated as a critical objective on which owner-directors of smaller firms base their business decisions nor be measured by them. In part, this is another manifestation of the lack of explicit emphasis on productivity, formally defined, among managers in general (see MacBryde et al PIN Report), and a belief that it cannot be readily measured in terms comparable with conventional national accounting practices. In the context of smaller firms, this is compounded by the wider set of motivations and aims that owner-directors have, compared to managers and directors in larger firms with more distributed ownership and formal systems of accountability

We therefore sought to ask whether or not companies are aware of their productivity underperformance and more generally whether they do, can, or should use productivity as a key performance indicator. We were also concerned to approach this question without using the word productivity itself given the contested nature of this term.

Company Accounts: Exploring productivity in SMEs without using the word productivity

The national accounts approach to productivity has a straightforward interpretation in company accounting terms. Labour productivity can be approximated from standard profit and loss and balance sheet items and has been used in research based on company accounts data (see e.g. Faggio 2010)

Figure 1 provides a simplified presentation of how the GVA numerator in the productivity calculation relates to standard accounting concepts. GVA is sales minus the cost of intermediate purchases.  GVA is in turn the sum labour costs and gross profits (profits before deduction of interest taxation and depreciation). Profits after deduction of interest taxation and depreciation is then available for distribution as dividends or retentions.

With this in mind we asked in our interviews and surveys whether managers used wages plus profits as a key performance indicator, thus avoiding the potentially confusing or “terrible” term “productivity”.

The disaggregation shown in Figure 1 also illustrates the limitations of using profits as a performance indicator. It is a partial measure of the efficiency of the company and is subject to distributional factors affecting labours share.

We would advocate the wider dissemination of knowledge, through for example company accountants, about using company accounts to approximate “productivity” measures at company level.

What we found out

The qualitative research showed that turnover is the most common business indicator used to guide business decision-making, but that others, such as year-on-year growth, are also used. Wages plus profits is almost never used as a measure. Particularly in very small firms offering advisory services, a combination of service offerings that are difficult to specify and measure, and business models based on extensive use of external associates and subcontractors, make the conceptualisation, measurement and management of productivity in these terms still more challenging. Structured management practices were not a prominent feature of the owner-directors’ approaches.

The pilot survey sample showed that the proxy for productivity – profits plus wages, divided by the number of employees or hours worked –  was rarely used as a key performance indicator and was even less likely to be rated as an important one. This is consistent with the qualitative findings. The pilot survey also showed considerable variation across companies in the use of particular indicators and in the total numbers of management practices used. Both of these were affected systematically by contingent factors. The number of practices used was strongly positively related to employment size and strongly negatively related to firm age in Services but there was no relationship in Manufacturing.

[1] “The UK’s Productivity Problem: Hub No Spokes” Speech given by Andrew G Haldane, Chief Economist, Bank of England Academy of Social Sciences Annual Lecture, London 28 June 2018 p.2.

[2] The numerator, GVA, is the value of output minus the value of intermediate consumption and measures the contribution to GDP made by a sector or business. There are many possible refinements to the denominator in this approach e.g. adjusting for labour quality or adding capital inputs to the denominator to generate “total factor productivity” but the core GVA concept is the same (see e.g. APO/OECD 2021)


APO/OECD (2021), Towards Improved and Comparable Productivity Statistics: A Set of Recommendations for Statistical Policy, OECD Publishing, Paris,

Barnett, A., Batten, S., Chiu, A., Franklin, J. and Sebastiá-Barriel, M 2014. “The UK productivity puzzle.” Bank of England Quarterly Bulletin Quarter 2 pp. 114-128

Bloom, N., Brynjolsson, E., Foster, L., Jarmin, R.S., Patnaik, M., Saporta-Eksen, I. and Van Reenen, J.V.  2017 What Drives Differences in Management. NBER WP 23300

Faggio, G., Salvanes, K.G. and Van Reenen, J.(2010) “The evolution of inequality in productivity and wages: panel data evidence” Industrial and Corporate Change, Volume 19, Number 6, pp. 1919–1951

McBryde, J., Mullen, H., Ball, P., Clegg, B., Smart, P., Despoudi, S. and Masi, D. 2019 Unpacking the productivity narrative in manufacturing organisations,

Office for National Statistics (ONS) (2017) Understanding firms in the bottom 10% of the labour productivity distribution in Great Britain: ‘the laggards’, 2003 to 2015

The Standards, Productivity and Innovation Board 2011 A Guide to Productivity Measurement. SPRING. Singapore

Low interest rates and the productivity puzzle

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Featured image as per the original post by Common Wealth

Read the latest blog by Common Wealth;
What does a very low-interest rate environment mean for firm financing and investment strategies? And what are the implications for issues of workplace governance?

Explore more from the PIN funded Research by Dr Craig Berry, Dr John Evemy and  Dr Ed Yates.

Rebuilding a Resilient Britain

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Professor Leaza McSorley, University of Sunderland and Co-Investigator of the Productivity Insights Network writes about her experience of working on the Rebuilding a Resilient Britain programme organised by the Government Office for Science.

The Rebuilding a Resilient Britain programme was established during the Covid-19 pandemic to address aspects of Britain’s recovery from the pandemic over the medium to long term.  The project convened groups of academics, policy makers and funders to focus on Areas of Research Interest to support Britain’s evidence-based recovery from the social and economic challenges facing the country.  Areas of Research Interest are the research priorities of government departments which inform their research strategies, wider strategy and policy development.

The Covid-19 pandemic resulted in a mobilisation of academic research and engagement with government.  Most of this activity needed to focus on the urgent matters at hand. Relying on academic research, data and analysis to protect lives (and livelihoods).

However, the Rebuilding a Resilient Britain project had the challenge of attempting to develop research priorities for government, funders and academics looking to the (very different and uncertain) medium and long term. The challenge was: what will we need to know in 3-5 years time, and what research do we need to do now to find that out?

As many of the research priorities identified are cross-departmental plenary meetings were chaired the Government Chief Scientific Adviser Sir Patrick Vallance and Professor Jennifer Ruben, Executive Chair of the Economic and Social Research Council.

The process was expertly led by ESRC/GO-Science ARI Policy Fellows, Professors Annette Boaz and Kathryn Oliver who have written about the project here, and facilitated by The Universities Policy Engagement Network (UPEN).  An objective of UPEN is to ensure diverse contributions in academic-policy engagement. This approach to supporting diverse voices at the table is particularly required when it comes to the topic of productivity. Given the Government’s commitment to ‘Levelling up’ and addressing regional inequalities it is important to listen to a more diverse range of expertise and experience.  I was asked to Chair the subgroup on “Productivity, Business and National Economy” and was pleased to represent the University of Sunderland and the Productivity Insights Network. The final report is available here: “Rebuilding a Resilient Britain: Local and National Growth”

The project ran from July to October, with the final reports being produced in January.  The groups produced 9 reports, totalling 528 pages and over 200,000 words. The scale and scope of the outputs give an indication of the volume of the inputs and resultant intensive process over the 6 month period. All nine reports can be read here at

The objectives of each sub-group were to i) collate existing evidence, ii) synthesise existing evidence and identify key messages for policy and practice and iii) identify evidence gaps and future priority areas of research interest and investment.

Productivity: key messages for research, policy and practice

The majority of academic research on productivity is in the domains of – competition, enterprise, skills, investment and innovation.  These five drivers remain an important part of the productivity puzzle. However, this is the paradoxical challenge of evidence-based policy making.  The weight of evidence does not necessarily reflect the weight of need. The fact that most evidence relating to productivity is within these five (mainly microeconomic) domains may be one reason why the UK has failed to tackle its relatively poor productivity performance. Productivity research has suffered from the street light effect, looking to find solutions in areas that are most illuminated through prior research.

The most recent data (January 2021) from the ONS show we are now witnessing the paradoxical situation where the technical/statistical measures of productivity outputs are actually improving due to a significant contraction in the hours worked in the economy and the closure of less productive (and high employment) sectors of our economy such as hospitality, leisure and retail.

The pressure to boost productivity can lead to improving productivity in the wrong way – a technical statistical fix, which shows up in the official statistic as increased productivity, and simultaneously reduces the productive capacity and total output of our economy through underutilisation of labour and capital (and reduced innovation and investment). This risks taking us back to regressive discussions of supposed trade-offs between employment and productivity and investment in ‘low productivity’ sector versus the frontier high GVA sectors. The productivity debate has moved on from viewing productivity as a technical measure of output (Labour productivity and Total Factor Productivity) to its role in driving growth, wages and wider economic and societal benefits.

Since the financial crisis in 2008 to date the OBR has revised its productivity forecast 40 times.  This downward revision in its productivity forecasts reflects the main conclusion from the report:  there is a widening gap between the theory, data, policy and practice when it comes to UK productivity.

From the report key evidence gaps and future areas of research interest related to productivity are identified as:

  • Micro: Research evidence at a micro (firm/industry level) on policy and practice that prioritises/delivers both productivity and employment improvements
  • Meso: Regional and structural inequalities and policy. Research that further develops regional-macro-economic linkages. Structural issues focused on labour markets and institutions
  • Macro: Structural causes and drivers of low productivity and economic growth.
  • Environmental sustainability and productivity and growth
  • International best practice/comparative research
  • Theoretical underpinnings of productivity

To support the objectives of the Rebuilding a Resilient Britain programme, the report recommends the following areas of research interest be prioritised now to support evidence-based policy making and delivery of plans for productivity growth in the medium to longer term:

a) Regional policy and regional inequalities: further research on how to solve the regional productivity puzzle and delivering ‘levelling up’. To simultaneously increase UK aggregate productivity and growth and deliver balanced and sustainable regional growth. i) Regional economic to macroeconomic transitions. Better understanding (theoretical) of how regional economies contribute to macroeconomic outcomes, and how macroeconomic policy can more effectively address/benefit from regional economic issues.
b) Structural causes and drivers of low productivity and economic growth: this should include: i) Labour market: creating the demand for skills and education; quality of work, pay and productivity; demographic change; inequality and inclusivity, particularly gender equality:  ii) Institutions: what role do institutions national, regional and local play in supporting productivity and growth? Role of public sector (including education and health), NGOs, civic, voluntary, community.

Begin with the end in mind – why do we want to improve productivity? Mirroring the debates we have had over GDP growth now is the time to re-focus on the potential benefits of productivity growth.  As with GDP too much attention – policy and research – has focused on the growth of productivity (the percentage change) and insufficient attention given to the i) the level of productivity ii) the distribution of productivity.  If we consider productivity as the given level of output to a given level of inputs it is then possible to reconcile both lowering inputs in a positive (socially and economically desirable) manner (such as the 4 day working week or reduced/balanced working hours, reducing the level of unstainable inputs – such as energy, materials) and achieving higher levels of outputs through improving innovation processes (improved management practices, good work, investment and diffusion of R&D, balanced regional growth) to deliver higher levels of output (sustainable GVA, foundational and tradeable goods and services).  To Rebuild a Resilient Britain productivity research must now provide new solutions to new and different productivity challenges.

From novel research methods, the green economy, inclusive practice and responding to a global pandemic: Highlights from 2020

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If you were to draw up a shortlist of words commonly used to describe 2020, challenging would almost certainly be on it. Despite the numerous challenges that we have all faced, thanks to the commitment and support of our tremendous Co-Investigators and wider network, we have been able to continue producing insightful and quality research into the UK’s Productivity Puzzle. To this end, we thought that for our final blog of the year we would identify 10 top themes that our network has contributed too (though not an exhaustive list). Keep reading to see how!

  • Novel methods to rethinking Productivity
  • Responses to COVID19 
  • Going Green: Productivity and the Green Agenda
  • A More Inclusive Approach to Productivity
  • Pioneering Practice in Productivity
  • Furthering the Conversation
  • Influencing Policy
  • High Profile Speakers Join Us in the Debate
  • Early Career Researchers Leading the Way
  • Hot off the Press (new for 2021)

1. Novel methods to rethinking Productivity

The following projects stand out in terms of a novel approach taken.

Clive Reynolds’ (Strategic Capability Ltd) – Productivity: A view from the workforce

Hadi Arbabi (Sheffield) – Engineering Productivity.

Homogenous deployment of mixed-used planning across the city is beneficial; Learn more about what Dr Arbabi and his research team learnt about Sheffield by reading the report in full.

2. Responses to COVID19 

Our Co-Investigators and Project leads were quick to respond to the challenges of C19. We presented a number of webinars and actively engaged with relevant organisations in order to address some of the impacts of the pandemic.

Watch the webinars again via our YouTube Channel playlist.

3. Going Green: Productivity and the Green Agenda

Although not a theme with a dedicated lead, the Network recognised the importance of the Green Agenda and were thrilled to received applications for projects by Dr Robyn Owen and the team at CEEDR and Prof Kerrie Unsworth and the team at the University of Leeds on their projects, Redefining Productivity Measurements and Sustainable and Productive?!!, respectively, which focus on the issues of Sustainability, Green Growth, Net-Zero and Low-Carbon Economies

The Impact Strategy Process taken from Dr Owen’s report on redefining productivity measures and assessment for a low carbon economy.

Based on the key informant interviews regarding selection and evaluation criteria for cleantech investments, and the insights case study businesses provided, Dr Owen and the research team developed the above model. The process is iterative and should be used to realign goals, strategy and actions regularly. The three dimensions, in which indicators are presented aim to mitigate a focus on either strategy or operational issues. More crucially, the sections environmental and commercial impact together can provide a nuanced understanding of productivity in the respective cleantech sectors. Learn more by reading the full report.

4. A More Inclusive Approach to Productivity

How can hubs best promote inclusivity in entrepreneurship and better support women and BAME?
Building on the exploration of inclusion and innovation, Dr Lara Pecis discussed how innovation can be used as a resource for productivity and inclusive economic development. Why not also read the blog from Lara’s project?

The research outcomes from the Pioneer project on the gender pay gap by Dr Emma Duchini‘s has enabled the team to pursue opportunities for additional research, alongside Prof Mirko Draca (Warwick) and Dr Arthur Turrell (Bank of England), the team have gone on to produce a Policy Brief which will be released in the New Year.

5. Pioneering Practice in productivity 

Prof Karina Nielsen‘s Round 1 funded project on Returning to Work and Thriving at Work has been making significant impacts in various industries. The IGLOO framework output from their project has been adopted by HR teams within a range of industries including UK Rail.
The work, with Dr Jo Yarker (Affinity Health at Work), was also recently nominated a Vocational Rehabilitation award for VRA 2020 Innovation Research and Education Award.
We are delighted to report that their IGLOO framework won the Innovation Research and Innovation Award. An excellent example of how project funding makes a difference in the workplace.
Find out more about Affinity Health at Work here:

6. Furthering the Conversation

Prof Adam Leaver’s PIN project on financialization, and the Hollow Firms report that he contributed too, had interesting findings that were picked up by the Financial Times, Spectator and BBC. Adam and his collaborators at the Corporate Accountability Network (CAN) are continuing to explore this with PIN support to find out whether excessive distributors are a) underinvesting and b) have a weak productivity profile.

Clive Reynolds‘ project on relating productivity in an organisational context has gained inter3est from a number of interested parties and we are thrilled that Clive is presenting with the Productivity and the Futures of Work team (Warwick) in January. Further details here.

7. Influencing Policy

Prof Duncan Maclennan (Glasgow) received PIN Pioneer funding in Round 1. The outcome of his research contributed to the UK 2070 Commission, in an independent inquiry into city and regional inequalities in the UK and is chaired by Lord Kerslake. The Commission was set up to conduct a review of the policy and spatial issues related to the UK’s long-term city and regional development. Read the PIN report here.Co-Directors Profs McCann and Vorley alongside a number of our co-investigators were acknowledged as contributors to the UK Regional Productivity Disparities report produced by the Industrial Strategy Council. The report, written by Robert Zymek and Ben Jones provides a comprehensive review of the evidence on both the causes of regional disparities and the effectiveness of policies to address them. For the full report is available here.

8. High Profile speakers join us in the debate

In April 2020, PINs Second Annual Conference went online! In early February to move the conference to an online format and were thrilled that most of our original lineup were able to join us for one of the first online conferences of the year.

Reframing the Debate addressed various aspects of the productivity puzzle and went on to comment on the implications of the pandemic.

We were joined by Lord Jim O’Neil, Robert Atkinson, Andy Haldane, Tera Allas, Chris Giles and Ashwin Kumar for the event.

A recording of the conference is available to view online here.

9. Early Career Researchers leading the way

Our Early Career Researcher (ECR) Network have been producing some outstanding work with outstanding impacts.

Early Career Researcher Dr Katy Jones from the Decent Work and Productivity Research Centre at Manchester Metropolitan University was awarded a PIN Small Project Fund in the second funding round.
The research gathered insights from employers about the potential impact of (and their likely response to) the extension of conditionality to working Universal Credit claimants. Whilst only a small-scale pilot study, it highlights a number of important issues which policymakers in the Department for Work and Pensions should consider as their ‘in-work offer’ is developed. Katy has since gone on to present her research to the House of Lords.

Daniel Kopasker‘s also joined the Network as an ECR and gained Seed Corn funding that enabled him to be awarded a further small funded project on mental health and well-being in the workplace. Daniel presented a C19 responsive webinar, with Katy as chair and both have also contributed to the Second PIN Book.

Hadi Arbabi joined the Network as an ECR and was funded in the Round 3 Funded projects. Hadi’s research, a novel and interdisciplinary approach to productivity offers a fresh take on productivity measures.

10. Hot off the Press

Our second book has just gone to print THIS WEEK!  Productivity and the Pandemic will be released in January 2021; with 21 chapters by a combined total of 46 authors from across the Network, our responsive commentary on the impacts of C19 is the MUST read of 2021.

Building Back Better: Why Early Stage Cleantech Financing is Critical for a Sustainable Productive Economy

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Featured image: as per the original post. 

By Theresia Harrer  & Dr Robyn Owen, Centre for Enterprise and Economic Development Research (CEEDR), Middlesex University 

Following the publication of their new report from the ESRC/PIN funded project, led by Dr Robyn Owen, Centre for the Understanding of Sustainable Prosperity (CUSP) researcher at Middlesex University’s Centre for Enterprise and Economic Development Research (CEEDR), and in collaboration with SQW Ltd.  Thersia Harrer and Robyn have provided a blog outlining their findings.

View the blog in full via the link below:

Redefining SME productivity measurement for a low carbon economy | Blog by Theresia Harrer and Robyn Owen


Matching People to Jobs and Hours: Drivers and Productivity Impacts of Under-employment

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Featured Image: As per the original post by PrOPEL Hub

By Colin Lindsay
Strathclyde Business School

Professor Colin Lindsay, Project lead for the PIN Funded Pioneer Project ‘Matching People to Jobs and Hours: Drivers and Productivity Impacts of Under-employment‘ with Donald Houston (University of Portsmouth), George Byrne (Research Consultant,, and Robert Stewart (Strathclyde Business School), has provided a blog, of the same title, which comments on some of the key elements of the ESRC-funded research. Read the blog in full via the PrOPEL Hub webpages.

Matching people hours and jobs: building back without under-employment


You can also view the recent PrOPEL Hub Webinar on the sa,me topic here:

Is Household Outsourcing Driving Down Productivity?

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Featured Image: Photo by Ross Sneddon on Unsplash

By  Colin Mason
Adam Smith Business School, University of Glasgow.

Economic activity occurs in both the formal economy which produces paid-for products and services and in the household economy which produces goods and services for their own consumption and hence fall outside the GDP boundary. These boundaries are constantly changing. The baby boomer generation will have grown up in households in which cooking and sewing were common. Indeed, the Singer Sewing Machine was a common domestic appliance. Now, of course, most of the food and clothes that are consumed by households is purchased from the formal economy.  An ONS commentary earlier this year on Productivity Measurement raised the possibility that some activity that used to be counted towards GDP has moved to the household sector and so now falls outside the ‘productive boundary’.[1]  Do such ‘production boundary’ shifts contribute to explaining the UK’s ‘productivity puzzle’?

Diane Coyle has suggested that this trend has accelerated with the expansion of online access enabling households to perform DIY digital intermediation tasks that were formerly purchased in the market economy.[2] One example is holiday bookings that were once booked in person in high street travel agents but now are booked by the traveller via the internet with little or no involvement with a travel agent.  Another activity that households now perform is online banking. The production of digital products by the household replaces market-intermediated services, removing them from GDP. Coyle notes that unlike the production of goods by households which are included in GDP, the production of services by households for their own consumption are excluded.

However, boundary shifts also occur in the other direction. It is apparent that low productivity service activities that were formerly undertaken informally the household economy and are now being outsourced to the formal economy and purchased by households and therefore now contribute to GDP. One example would be personal grooming (e.g. beauticians, ‘Turkish barbers’). Another is lifestyle activities (e.g. fitness, coaching). A third is food – particularly take-ways and coffee shops. Moreover, whereas in the past the consumer would perform the collection of the food themselves, increasingly the delivery is also outsourced. Similarly, online shopping involves the transfer of both the product selection activity and the delivery of the purchases to the market. This could also drive down productivity.

The scale of these changes is very apparent in every high street and local shopping centre across the country. For example, Sauchiehall Street, one of Glasgow’s major retail thoroughfares is now dominated by food outlets – bars, restaurants and take-aways. Very few retail units remain.  The increase in online shopping during COVID-19 has accelerated the shift of household-performed services to the market economy. For example, the Financial Times reports that Just East’s transactions have increased by 20% in recent weeks while Amazon spending jumped 82% in lockdown with average transactions up 18%.[3] No one is expecting online activity to return to pre-lockdown levels.

Two questions arise. First, what is the contribution of these substitutions across the production boundary to the observed slowdown in the UK’s productivity growth?  And second, are these changes more apparent in the UK than in other countries and hence able to explain the UK’s poorer productivity compared with its international competitors?



[2] file:///C:/Users/cm252t/Downloads/ESCoE-DP-2017-01.pdf

[3] Make the most of your saving in the time of pandemic, FT Money (Financial Times) 12th September 2020.

What value can Universities add to Economic Recovery planning?

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Featured Image: Photo by Alex Blăjan on Unsplash

Some baseline considerations in the design of a Universities-coordinated West Yorkshire Economic Recovery Plan

By Andrew Brown and Gary Dymski [1],
Economics Division, Leeds University Business School, University of Leeds 

For the second time in 13 years, the United Kingdom has experienced a ‘black swan’ (or tail-risk) event that has ruptured economic relations and threatened the collapse of the cash-flows and asset values on which the reproduction of everyday capitalism depends. [2] The 2007-08 financial crisis has been followed by the 2020 Coronavirus pandemic. The latter has both resulted in significant loss of life and necessitated an extended lockdown that fully halted most aspects of both aggregate supply and demand to a halt for an extended period.

A challenge has been presented to the University of Leeds and other universities in West Yorkshire: to develop a plan for the post-lockdown economic recovery in West Yorkshire. Growth strategies are routinely developed by units of government, often relying on advice provided by professional-service firms (consultancies) optimized for this purpose. So what value can a university add? Government plans reflect political judgements and values (‘inclusive growth’, for example), while consultancies specialize in producing, at speed, analysis of the latest empirical measures of the drivers of economic activity. Universities’ core consists of their academic faculties, whose members’ research plugs into reservoirs of accumulated and emerging knowledge across academic disciplines.

These faculty members’ value added is their capacity to combine core theoretical insights and available evidence – quantitative, institutional, and historical – into proposals for new concepts, processes, products, programs, or institutions. This is their unique value in policy deliberations – the capacity to show how policy choices can break new ground. Yet, at the same time, academics’ ideas about policy can often derided as ‘blue sky’.

Avoiding the perception of academic research is always to be dismissed as ‘blue sky’ and unusable depends on both sides to the policy discussion – both the engaged academics and the public policy-makers – being tolerant and flexible in communicating with one another. These qualities are always important in good policy-relevant work, but the unique ‘multi-dimensional’ circumstances of the current scenario make them especially crucial in these exchanges. The multiple dimensions in question involve both time and space. We elaborate these before proceeding.

A ‘black swan’ strategic response in a country with a multi-level governance structure  

An economic strategy to achieve a given goal in any regional or national socio-economy must bring together three distinct components: the substantive issues to be addressed; the policy structures in place that can implement whatever actions are decided upon (and which determine which actions can and cannot be taken); and the relationships between those charged with policy implementation, those charged with  initiating or expanding economic activity (employment and business creation), and the communities of academic and policy experts available to provide guidance.

Assembling a useful West Yorkshire economic recovery plan must then involve these three components. But there are several special features about the challenge involved that require special attention. First, the pandemic has occurred at a global scale; it is not just a local problem or deficit requiring attention. As such, the lockdown required by the pandemic has shocked, and even halted, the global economy.

This leads to the second unique feature: the grinding halt of economic activity – and the quickly mounting costs of subsidizing workers’ incomes and firms’ lifeline expenses – has pushed forward the priority of restoring normality. The usual goal-seeking aspect of economic strategies – ‘inclusive growth’ or ‘sustainability’ – is replaced now by the need to ‘build back better’.

This gives us the third feature: huge expenditures of government financing have been needed to avoid collapse to this point, and much more will be needed. Normally, financing at this scale would be associated with grand investment plans for new industries or new housing estates, etc.

However, lurking behind both of these unique features is that the Yorkshire region – indeed, the UK, and the world as a whole – had already fixed on the need to prioritize new investments to meet two global challenges – stopping climate change and meeting the sustainable development goals (SDGs). In the G20’s June 2018 ‘blended finance’ plan for SDGs, national governments would finance the measures needed to attain these targets, with underwriting provided by multi-lateral development banks and the World Bank. The Covid-19 crisis has laid waste to that plan, as national governments around the globe have had to use whatever policy space they can find to sustain their residents in safety.  So does this mean that SDGs and climate change are off the agenda? Not if the issue of recovery can be melded together with these longer-term priorities.

This leads to the next defining feature for this strategic problem. What it means to ‘address’ the issues at hand is itself problematic: policy solutions can range from ‘fixes’ to permanent shifts toward sustainable ‘steady-states’.[3] A ‘fix’ only restores a baseline that was already inadequate from an SDG and climate-change perspective. The material issues behind the Black Lives Matter movement have highlighted that the concentration of BAME residents in certain neighborhoods has led to systematic violations of some of the SDG categories, along racial and ethnic lines. To finance recovery with money that was never intended for ‘staying in place’ purposes will only feed populist anger and resentment, on all sides.

And this leads in turn to the next unique aspect that has to be baked into a recovery strategy: while appropriate and accessible solutions to the ‘black swan’ coronavirus event have proven elusive to date, the same can be said for SDG and climate-change targets. The problem of assuring adequate nutrition for all residents of the UK is not solved; nor is the problem of providing adequate and safe housing for all in the UK has not be solved; nor of access to education and health for all; and so on. And on top of these unknown paths lie the barely explored routes to climate sustainability. We have no maps for how to journey along these pathways. So it means that possibly deep disagreements will occur about what roads to follow, and why. Even the experts are guessing. It must not be forgotten for those engaging in this exercise that policy solutions at scale are expected, even demanded, by political leadership, not successful partial demonstrations. The experts relied on to think about the issues involved have to take this on board and be tolerant and flexible in their mutual discussions.

The sixth defining feature of the Covid-19 regional recovery challenge is that it will unfold in a multi-level fiscal structure, in which only a few of the controls over the resources needed to establish local policy are accessible to sub-national policy-makers. Coordination amongst the various levels of public expenditures and revenues is crucial. But the rules and fiscal purse-strings for governance have been held centrally in the UK since time immemorial. The ‘devolution’ effort to localize structures of governance and public accountability has been unfolding at an uncertain pace for nearly a decade, but is very far from complete.

And this brings us to the final defining feature: the UK government has, since 2009, been committed to austerity fiscal (macroeconomic) policy. So the NHS, social welfare expenditures, school spending, and so on, have been at levels that have left many residents and regions in personal or economic deficit. This has been picked up in reports done by the UK2070 Commission, the Commission on a Gender Equal Economy, and the Runnymede and Joseph Roundtree Foundations. The fact that fiscal rules have been suspended in the immediate wake of the Covid-19 lockdown does not mean that austerity is behind us: to the contrary, many political front-benchers have been insisting that fiscal discipline must be restored as soon as lockdown ends. But since the levels of human need and economic hardship have increased dramatically since March, a return to normal levels of fiscal commitment will lead to further unanticipated human deprivation.

What not to do: the pandemic and the US’s multi-level structure of governance

In the spirit of Monty Python’s ‘how not to be seen’ sketch, it might be useful to consider how the policy response has gone wrong in another country with a multi-level structure of governance. The country in question is, of course, the United States. While newspaper accounts set out the specifics of the policy car-crash unfolding there in real-time detail, author Michael Lewis already identified the problem in a book based on his research in the year after the current US President took office.

In The Fifth Risk, Lewis describes the collision between the immensely complicated federal departments of the US government – focusing on the Department of Energy, which manages all aspects of nuclear strategy and supports or houses much of the US ‘Big Science’ establishment – and the incoming Trump Administration. As Lewis tells the story, the Trump Administration’s appointees are few and far between, and those put in place have typically been ideologues uninterested in the substantive issues handled on an ongoing basis by federal agencies. His ‘fifth risk’ is ‘project management’ – by which he means the oversight and guidance of longer-term programs such as nuclear-waste management, pandemic prevention and response, wildfire control, and so on.

The outstanding example of a policy failure due to this widespread indifference is the Coronavirus pandemic. The Trump Administration did not name a director for the Centers for Disease Control for months after the February 2017 inauguration, did not name replacements for the many appointees whose term of office concluded with the departure of the Obama Administration, and so on. Subsequently, the CDC has had its budget slashed and is now being blamed (among others) for the severity and duration of the crisis. President Trump has made it clear that the federal government no longer is responsible for further responses for testing and control of this pandemic in the US: it is now the responsibility of the 50 governors of the individual states of the Union.

Bottom-up, top-down, and ‘levelling up’? The UK’s unsolved multi-level governance challenge

The challenge of multi-level governance is evident in this US case study. The problems there involve unresolved questions over the structure of government: how resources (even medical equipment) are to be shared out between the federal government and the states; the ability of local authorities to refuse participation in national programs (notably, at the moment, the Affordable Care Act passed into law during the Obama Administration); the expanding power of the Executive Branch in decreeing national policy without recourse to Congressional law-making processes. The chaotic policy response to Covid-19 in the US has led to more and more finger-pointing, and most recently to protests and violence on a scale not seen since the 1960s.

The political relationships of national government with local authorities, and of political parties to political power, is quite different in the UK than in the US. Nonetheless, when the Covid-19 lockdown hit, the country had many unresolved issues involving core political economic issues: the locus of public budget control, the country’s surplus-transfer mechanisms (from wealthier to poorer regions and districts), the relationship of the nation to its trading partners in Europe and in the rest of the world, and the future of immigration and of migrant workers, to name several. These unresolved issues were already heading for a collision. The adverse GDP shock anticipated from Brexit was already on course to capsize or stall the completion of plans for the ‘devolution’ of governmental policy controls before the lockdown. Plans to reduce the public footprint of nation-defining institutions such as the NHS and BBC have been pulled back in the emergency; but no political declarations of restorative public support beyond the lockdown have been made.

This uncertainty, worsened in the past four years by Brexit, has undercut investment generally, and flatlined UK productivity. Infrastructural and green-economy investments would be ‘smart responses’ to the Covid crisis; but these must work together with restoring the resilience and financial ‘health’ of both household and business sectors across the country. This has not been done.

Instead, the Covid-19 crisis has exposed many ‘holes’ in the planning, accountability, and delivery architectures in the UK, as it has in the US. Multi-level governmental structures, such as that of the UK and US, can carry on in normal times without the pressure points or unresolved linkages in those structures coming to light. In the UK, local authorities’ staff capacity and resources for analyzing, planning, and implementing socio-economic policies on behalf of their regions have been squeezed by years of macro austerity policy.

As long as promised human services have been provided to a minimal standard, and as long as educational, employment, and entrepreneurial processes have produced cash-flows sufficient for social reproduction (‘provisioning’), the ‘holes’ that this has left in local authorities’ capacity has been relatively invisible. The gap has been made up, in part, by fee-for-services offered to these authorities by consultancies. This is where a key difference emerges between the US and UK multi-level governance structures. The 50 states of the United States, together with local units of government (counties, cities, districts, others), account for approximately 50% of all revenues collected annually in the United States. Most public services are provided with intermixed state and federal funding. Some states with higher income levels – including California, Washington, New York, and Massachusetts – have adopted relatively high, progressive state income taxes so as to securely fund those services. And these are states that typically transfer a portion of their net taxes collected to lower-income states.

Scale-appropriate, flexible ‘blue sky’ thinking: how universities can help local authorities

Of course, the local authorities in the UK have nothing like this sort of fiscal autonomy. And the UK lacks the scale and resources to permit the emergence of adversarial politics as bitter and unresolvable as those that have gripped the US at least since the 1980s – if not since the 1964 passage of the Civil Rights Act. Severe societal crises require responses at scale and at speed by those responsible for societal governance. Multi-level structures of governance must, to avoid political ruptures, transmit policy responses and resources smoothly from central to local levels. There is a desperate need in the UK in the current moment of pandemic-driven crisis for policies that respond to local needs.

This is likely to require structural governance reforms. It is likely that UK economic policy approach must make a clearer distinction between meeting human and social needs (indeed, the SDG goals), on one hand, and encouraging innovation, inclusive growth, and competitiveness, on the other. This will likely require a real rebalancing of fiscal policy responsibilities and revenues between national and local levels, along with a clearer delineation of the rules under which surplus recycling amongst regions should occur.

These sorts of fundamental changes may or may not require a wholesale turnover of the national government. What is crucial is that these sorts of questions about economic policy-formation processes and structures not become political footballs between contending rivals. A structure strong enough to sustain changes of government is in order if the UK is to have the stability to steer its own economic course once the invisible backbone provided by its EU membership has been removed from the body politic.

Current events are vividly making this point. The limits on what is acceptable to the current government have already been tested and stretched by the pandemic. The period of recovery from the pandemic, which will be accompanied by an adverse-macro-shock Brexit, will test those limits further. The question is whether the further policy shifts made to avoid national economic depression during the long period of recovery will reflect local needs and political consensus.

This is the context in which University advice for local and combined authorities – in the case of the University of Leeds, for West Yorkshire Combined Authority – must take place. The entire unfolding scenario of fundamental policy debate needs a fair and impartial space for debating the issues; and it needs access to a fairly-mediated evidence base, and it needs well-umpired debates amongst those with different theoretical points of view. The local authorities are too thinly staffed to hire and retain the experts who can provide that space. The university sector, alone among UK institutions, can provide this space. It has survived the turn to fee-based support without surrendering its broader public mission.[4]

The universities can play this role not by turning within, and seeking the advice of their most elite and renowned voices, but by opening up. On one hand, universities should open more fully to what might be termed ‘everyday impact’ – encouraging academic and research staff to come forth with policy ideas, especially those rooted in expressed needs of the people of surrounding communities. And on the other hand, multiple channels to surrounding communities must be opened even wider. The tentative steps toward the ‘anchor institution’ role of universities, and toward encouraging ‘impact’, move in the right direction. Impact in the context of the national REF exercise has too often been interpreted in the context of product invention or of knowledge transfer (from gown to town). Impact activities must also include engagement with communities – dialogues, investments in local initiatives, encouragement of community-building, work with the young.

This ‘opening’ to the communities around universities will expand the space for policy-related discussions that break through current barriers of imagination or customary activities. The time is right for widening circles of possibility. Many of the ongoing debates inside the academy – degrowth versus renewed economic growth, competitiveness through participation in global supply chains versus renationalization of production, post-petroleum individualized transit versus large-scale collective transport, and so on – are unresolvable so long as they remain inside the ‘ivory towers’. And while national efforts to establish national economic strategies around key industries are admirable, there is no substitute for creating local community-university platforms for social-policy, sustainability, and economic-competitiveness experimentation.[5]

This turn to community-linked universities is not a call to restrict debate within the university; to the contrary, a broad array of ideas in every field is needed to push thinking and human possibility forward. It does mean that academics engaging with communities and with local authorities must make themselves aware not just of future-perfect scenarios but of current resource constraints. That said, the more new ideas see the light, the better. What constitutes ‘blue sky’ – that is, impossible – thinking about policy alternatives is not clear in the current environment: as noted, ecological futures are a work in progress, and innovative solutions to educational, healthcare, and housing deficits are still being worked out. Political voices at all levels have to be heard and validated. Diverse community representation is a must – the people have a right and a need to speak. And universities can provide a critical role in making the people’s voices heard.

The post-Covid moment: policy memoranda, position papers, and strategic syntheses

While imagining how the broader university-community relationship can evolve, the needs of the current moment must be kept uppermost in mind. At present, local and combined authorities with uncertain resources at their disposal, faced with imminent budget crises, need advice. There is a need for policy memorandums – which convey objective, evidence-based analysis with action steps that respond directly to the problems identified in the analysis. Position papers that clearly identify the ‘entry point’ of the author(s) are also helpful, as they clarify the author’s underlying assumptions. There is a key role, too, for in-depth reimagining of how economy and society could be organized, which, we would argue, is most valuable when developed and synthesised in a context and region specific way.

An example might help clarify what we mean by ‘context and region specific’. Consider recent efforts in California, aided by the University of California, to design public policies responding to the dangers of wildfire incidence and losses in that state. The ideas that emerged in these efforts were scaled to what the state could mandate: for example, require the clear-cutting of small brush in perimeters around woodland housing, regulate materials used for roofing in woodland/outlying housing, etc. The definition of the problem could of course be scaled ‘up’. For example, two other factors in ‘global warming’ are the drying out of the state through reduced precipitation, cutting the snowpacks in the Sierras; and groundwater depletion throughout the state due to overpopulation. However, taking on these deeper causes would lead to solutions more radical than are feasible or even thinkable for the California policymaker community. Addressing these wider issues would require national scale analysis and policy, informed by regional scale context. At a national scale, a solution would be to ban people from building their wilderness palaces in remote, fire-risk areas just because they didn’t want to be near other people; but that would not be enforceable regionally. Thus, there is always a balancing aspect that invisibly lies behind effective local and regional policy interventions, and those that must be interlinked with policies at national and indeed global scales.


[1] Emails:;

[2] Nassib Nicholas Taleb, introduced this term into contemporary discourse with The Black Swan: The Impact of the Highly Improbable. New York: Random House, 2007). Chapter 1 defines it as follows: ‘First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme ‘impact’. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable. … [that is, a ‘black swan’ event involves] the triplet: rarity, extreme ‘impact’, and retrospective (though not prospective) predictability.’

[3] These terms are worth unpacking. A ‘fix’ in everyday parlance refers to an informal or temporary solution. This term was adapted by David Harvey (he introduced it initially in his The Limits to Capital. Baltimore: Johns Hopkins University Press, 1982) and was subsequently came into common use in human geography (see, for example, Erica Schoenberger, ‘The Spatial Fix Revisited,’ Antipode 36(3) June 2004: 427-33). Harvey portrays capitalism, using a broad Marxian crisis framework, as beset by several crisis tendencies, among which is over-accumulation (under-consumption) – a condition in which productive capacity outpaces consumption and/or investment outlets. When this happens, continued accumulation requires further an expanded number of consumption/investment hubs. The expansion of business service offices or supermarkets can be seen as examples of spatial fixes. A spatial fix is at once necessary but, at the same time, temporary – the value invested in any location only retains its value if another is found. The notion of a ‘steady state’, in macroeconomic theory, refers to a configuration of demand and supply forces that can be reproduced or smoothly expanded through time.

[4] There is more to be done to retain or earn the public trust – for example, by insuring that all Britons have access to all universities at all levels, regardless of income or racial/minority status. But this is an item readily added to the universities’ agendas, especially in the era of social-policy rethinking spurred by the BLM movement.

[5] This, of course, will have implications for what is valued in academics’ efforts to meet performance expectations of university supervisors, and for any national efforts – should they remain necessary – to evaluate excellence in academic work.

Understanding the impact of mental health and wellbeing on business performance in Small and Medium Enterprises

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By Soumyadeb Chowdhury1, Alexander Kharlamov1, Oscar Rodriguez-Espindola1, Prasanta Dey1, Ian Maidment1, Peter Ball2, Carolyn Chew-Graham3, Steven Marwaha4, Joemon Jose5

1Aston University, 2University of York, 3Keele University, 4University of Birmingham, 5University of Glasgow

Primary contact: and

This Photo by Unknown Author is licensed under CC BY-NC-ND

The importance of mental health and wellbeing is becoming widely recognised. Mental health and wellbeing are complex constructs and our understanding of it or its implications on organisational performance is limited. The context of Small and Medium Enterprises is particularly challenging.

In the EU and UK, SMEs are limited to fewer than 250 staff and are usually partitioned into micro firms (1-9 employees); small enterprises (10-49 employees); and medium enterprises (50-249 employees) (OECD, 2005). According to the Department for Business, Energy, and Industrial Strategy October 2019 Statistical Release[1], there were 5.9 million businesses in the UK. Of them, 5.82 million (99%) were micro or small businesses (up to 49 employees); 35,600 medium businesses (50-249 employees) and 7,700 large businesses (250 or more employees). While micro and small companies employed 47.8% of the UK workforce, medium employed 12.6% of the UK workers. In terms of turnover, micro and small companies’ share was 36.8% and medium businesses’ share was 15.4% of the total UK turnover at the start of 2019. Overall, the SME sector in the UK employed 16,630,000 people and generated £2,168,005 million. In terms of industrial composition, Construction had the largest number of SME businesses (17.68%), followed by Professional, Scientific, and Technical Activities (15%), and Wholesale and Retail Trade and Repair (9%). Yet, Wholesale and Retail Trade and Repair brought in the largest turnover (1/3 of SME turnover) and employed most people (14% of all SME employment). (Department for Business, Energy and Industrial Strategy, 2019).

SMEs usually face a large number of challenges, such as lack of stable financing and lack of scalability opportunities leading most SMEs to fail within the first year of existence (e.g., OECD, 2018). After analysing the data from Austria, Czech Republic, Estonia, Germany, Hungary, Italy, Latvia, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, and United Kingdom, a number of OECD studies concluded that “the productivity gap between large firms and smaller SMEs has widened” between 2005 and 2014, with micro firms (1-9 people firms) particularly suffering from decreased productivity in the manufacturing sector (OECD, 2018, p.6). These findings uncover an interesting paradox: even though the rapid development of SMEs is desirable for any economy, their prevalence does not guarantee increased productivity, which is one of the major factors for economic prosperity.  At the same time, recent advances in business and economics literature suggest that productivity can be increased through the improvement of job satisfaction, life satisfaction as well as via increasing the level of wellbeing (e.g., Oswald et al. 2015; Clarke and Mahadi 2017; etc.). Under these circumstances, the link between individual wellbeing, SMEs and productivity becomes very interesting for further research.

Wellbeing and Productivity in the Business Enterprise Sector: The Curse of SME

In order to understand the link between productivity and wellbeing in the context of SME’s, we formulate the Business-Wellbeing-Productivity framework (Figure 1), which connects business size and organisational structure with wellbeing parameter, which, in turn, is correlated with productivity. Using country-level dataset of the OECD countries, we show that prevalence of SMEs in a country’s business sector is associated with the decrease in productivity of this country through the SMEs’ negative impact on the workforce wellbeing.

Figure 1 Business-Wellbeing-Productivity Framework

The development of SMEs within the business enterprise sector in a given country is related to the overall wellbeing of this country’s workforce and this wellbeing indeed affects country’s productivity. We propose a new Business-Wellbeing-Productivity (BWP) framework, linking business performance to business size through the workforce wellbeing factors and test this framework using data from 38 countries worldwide including Australia, Austria, Belgium, Bulgaria, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, UK, and United States. We find that BWP relations are characterized by “the Curse of SMEs”: large number of SMEs in a country negatively influences this country’s workforce wellbeing determinants, which, in turn, directly (negatively) affect productivity. In other words, the prevalence of SMEs in any given economy negatively impact productivity because it leads to decline in people’s job and life satisfaction.

The initial impact of COVID-19 on SMEs in the UK on Mental Health, Wellbeing and Productivity

This study considers first-order effects of COVID-19 on SMEs in the UK with data collected in April 2020. In a comprehensive survey study (N=192), we measure a range of effects of the pandemic on the way SMEs handle the existing crisis. While under normal circumstances we would expect that wellbeing positively affects productivity in organizations consistent with previous research (e.g., Oswald et al., 2015; Sgroi, 2015) we do not observe the same relationships in times of crisis. We find that SME workers are overwhelmed by the income concerns – i.e., financial instability is a major factor explaining increased anxiety, declined wellbeing and decreasing productivity.

Figure 2 Relative position of income, wellbeing and SME performance under Normal vs Crisis conditions

The second most important predictor of productivity identified is the number of days working from home, which affects productivity negatively, meaning that the more SME workers are required to work from home the worse is the productivity of the business. General wellbeing is predicted by greater emotional stability, low number of jobs and greater income. Job satisfaction is predicted by company’s high innovativeness, higher individual’s conscientiousness and emotional stability, lower working hours and larger frequency of work-related training. Financial wellbeing is predicted by higher conscientiousness, lower anxiety and depression scores (i.e. better mental health), greater income, fewer work from home days, longer employment and greater frequency of trainings per year. Contrary to previous research, we demonstrate that in times of crisis securing basic income needs becomes a greater concern than the overall wellbeing together with the work mode which plays a critical role in ensuring that firms remain productive. Further research is required to understand the complex link between individual wellbeing and SME performance in times of crisis.

Modelling the Impact of COVID-19 on Small and Medium-sized Enterprises in the UK

By June COVID-19 pandemic caused global impact affecting individuals and organisations. The Small and Medium Enterprises (SMEs) have been some of the most affected sectors and beyond observed economic data most of the insight is anecdotal and our previous research during the early stages of the pandemic demonstrate that in times of crisis SME workers were overwhelmed by income concerns which predicted SME performance better than individual wellbeing. We explore the impact of COVID-19 on productivity considering wellbeing, job characteristics, firm characteristics, individual characteristics, leadership and mental health using Structural Equation Modelling on a sample of UK SME employees (N=163). We found that wellbeing strongly impacts productivity.

We consider a wide range of factors (such as organisational responsiveness, leadership, use of ICT and working remotely, government communication, change management within the organisation and resource adaptability) and tried to find the main determinants of successes and failures of SMEs as a result of pandemic. We are particularly interested in the effects of COVID-19 on productivity. Using a survey, conducted with British SMEs, we consider a broad range of factors from individual psychological characteristics to financial circumstances of companies in order to determine the main consequences of coronavirus on SME performance.

Our main finding is that individual wellbeing of the SME employees directly influences productivity. SMEs, where staff reports higher life and job satisfaction levels achieve better productivity outcomes. Mental health issues as well as Organisational flexibility has a negative impact on productivity. Wellbeing is positively dependent on financial wellbeing, general wellbeing job satisfaction, and leadership quality. Work strain has a strong negative impact on wellbeing.  Even though previous literature showed that (i) human mental health may be affected by COVID-19 anti-spread measures (e.g., Galea et al., 2020) as well as (ii) demonstrated the positive effect of improvement in individual wellbeing on productivity in experimental setting (e.g., Oswald et al., 2015) and in the context of a developing economy under “business as usual” (e.g., Clarke and Mahadi, 2017), this research extends existing literature by establishing a strong link between wellbeing and productivity during crisis and in the context of SMEs, which has not been done before.


Clarke, N. and Mahadi, N., 2017. Mutual recognition respect between leaders and followers: Its relationship to follower job performance and well-being. Journal of business ethics, 141(1), pp.163-178.

Galea, S., Merchant, R.M. and Lurie, N., 2020. The mental health consequences of COVID-19 and physical distancing: The need for prevention and early intervention. JAMA internal medicine, 180(6), pp.817-818.

Oreg, S., 2003. Resistance to change: Developing an individual differences measure. Journal of applied psychology, 88(4), p.680.

Oswald, A. J., Proto, E., & Sgroi, D. (2015). Happiness and productivity. Journal of Labor Economics, 33(4), 789-822.

Potential Productivity Premiums Locked in Spatial Organization of Cities

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Featured Image: Photo by NASA on Unsplash

by Hadi ArbabiDepartment of Civil & Structural Engineering, The University of Sheffield

Our current understanding of and approaches to devising and selecting infrastructural and ultimately land-use interventions for better urban economic performance are often of limited capacity in providing long-term ‘place-based’ blueprints. Best framed by Sir David Higgins, the former Chair of HS2 Limited, what we need is an overall national transport strategy for and against which individual interventions can be constructed and appraised.1 In our Productivity Insights Network project, we attempted to quantifying a sense of productivity premium that may be locked in and associated with the spatial organization and connectivity of small-area neighborhoods and their demographic profiles within cities.

Cities as geographic networks

Emerging studies on patterns of urban scaling across systems of cities have sought to formalize and explain long-observed size-related agglomerations in and across different countries by developing explicit and implicit geographically embedded network models of cities’ inhabitants and mobility infrastructure.2 These works make explicit the assumption within the agglomeration-related work that average-aggregated urban economic output is a function of the number of human interactions fostered and facilitated by cities. Within these spatially explicit frameworks, long-term blueprints of infrastructure can then be thought of in terms of spatial layouts of the cities’ inhabitants that increase or maximize the number of interactions between individuals across the city and hence its economic output. Particularly, if given a certain labor and skills profile, the relative number of interactions between a city as is it exists in space and how it could potentially be (re)arranged provides a gage for the magnitude of potential productivity premium related to the city’s spatial organization.

What we have seen so far

In the rest of this post, I briefly summarize our main observations based on our optimization of inter-neighborhood distances in Sheffield to maximize its inhabitants’ interactions. I should mention in advance that our findings are mostly intuitive in themselves and might appear trivial. What is of importance, however, is that they are independently reaffirmed by our approach which can be seen to be more general in its assumptions especially avoiding strong ones regarding individual behavior.

  1. Denser cities perform better especially if long-range connectivity is more difficult.

This one is too obvious. It is easy to see that a trivial solution to optimizing inter-neighborhood distances, for maximizing individual interactions for a geographically embedded social network on a flat plane, is to stack individuals vertically to maximize density and interactions!

We have estimated Sheffield’s potential productivity premiums as the number of inhabitants’ interactions, under a varying influence of distance on interactions, relative to those of the city’s existing geography. When we assume a mobility infrastructure that assists in formation of long-range interactions already exists, there is virtually no difference in productivity of an optimized layout and only about a 12% advantage for an extremely densified layout. However, as long-range interaction formation becomes more difficult, ie, we assume a more realistic provision of mobility anywhere outside London, rearrangements of the city’s neighborhood layout can unlock a 15% increase in output with extreme densification signaling a near sevenfold increase in output.

  1. Homogenous deployment of mixed-used planning across the city is beneficial.

For most cities, the neighborhoods with the largest number of inter-neighborhood interactions comprise the city center and often exist within the city’s ring road. City centers, therefore, house a high-density mix of residential use, commercial activities, and crucially employment. This combined effect of their density and mixed use transforms them to the foci of both inter- and intra-neighborhood interactions. Meanwhile, the further away one gets from the city center, the more the prominence of suburban commuter-belt residential use and fewer the opportunities for local interactions.

Delving into the inter-neighborhood distances after optimization shows that increasing the number of interactions in the city requires a change in the land use. In essence, city-center type activities need to be more easily accessible city-wide. As such, the long-term optimal spatial layout of cities can be seen as one more resembling a chess board pattern of residential/commercial use that both maximizes overall city-wide interactions and facilitates walkability.3

Choropleth showing indicative mean percentage change of inter-neighborhood distance for each neighborhood. Color scheme from green to blue corresponds to an average decrease of distances to an average increase in distances after optimization; and as such, whether the neighborhood as a whole needs to become more central to facilitate more interactions.
  1. Rearrangement of neighborhoods unlocks the highest potential in relatively lower-income lower-education neighborhoods

Mean increase in neighborhoods’ interactions correlates systematically with their population-weighted levels of education. While, the magnitude of these effects may be due to the particularly segregated organization of neighborhoods in Sheffield, the core reasoning remains the same as that underlying the need for mixed-use planning. Lower-income lower-education neighborhoods are inherently more likely to be vulnerable to effects of low long-range accessibility while simultaneously less likely to feature adequate employment opportunities. The break-up of core city-center type functionality to be more evenly distributed across the city cultivates more interactions in these neighborhoods.

Mean percentage increase in neighborhood interactions against population weighted neighborhood average education levels. It is worth mentioning that the top 10% of the largest increases in interaction count because of our optimization of the layout involve neighborhood pairs with one area of low average income.

Connectivity beyond physical mobility

As a final note, we should perhaps mention that interpretations of urban scaling models of cities need not be constrained to purely physical aspects of mobility. Our approach has been motivated by and particularly focused on the physical aspect of the spatial organization of cities and the provision of mobility within them and we have, simplistically, quantified interactions and the possibility of their existence over distances in a city. With particular reference to the ongoing COVID-19 pandemic, the prevalence of home-working has forced a dramatic drop in physical intra-city mobility.4 However, for those sectors that have remained economically active despite lockdown measures, the underlying individual interactions involved in creating cities’ output have not completely vanished. Portions of these interactions are now simply forced to be made remotely. The spatial patterns of interaction that we have identified, ostensibly based on road distances between neighborhoods, can, therefore, be interpreted as priorities for provision of alternative and/or digital connectivity infrastructure.


1 – Economic Affairs Committee. The Economics of High Speed 2, House of Lords Economic Affairs Committee 1st Report of Session 2014‒15. (2015).

2 – Bettencourt, L. M. A. The Origins of Scaling in Cities. Science 340, 1438–1441 (2013).

3- Hamiduddin, I. Journey to Work Travel Outcomes from ‘City of Short Distances’ Compact City Planning in Tübingen, Germany. Planning Practice & Research 33, 372–391 (2018).

4 – Google. United Kingdom COVID-19 Community Mobility Report. (2020).