The Key #Budget2021 Takeaway for Business Leaders
Our Founder, Lee Evans, shares his key takeaway from the 2021 Budget.
It's been a week since the Chancellor delivered his Budget to Parliament. Now that the dust has settled, what lesson should business leaders take from the Chancellor’s announcements?
Here is my key takeaway: tomorrow’s prosperity demands higher productivity today. Or, put another way, organisations need to put rocket-boosters on their productivity if they are going to not only survive, but thrive, in the years ahead.
The Chancellor was clear that whilst there was much to be optimistic about – including a return to pre-pandemic GDP levels sooner than anticipated and less-than-expected scarring of the economy from COVID-19 – plenty of lights are flashing on the dashboard of the global economy.
The biggest issue can be summed up simply: the global economy’s return to growth after the pandemic has put enormous pressure on global supply chains, which is combining with labour shortages to produce higher inflation. Businesses are having to pay more for their inputs, goods and labour.
Faced with this, businesses have three basic options: raise prices, reduce margins, or boost productivity. The first is partly inevitable, but doing it too much risks seeing you outcompeted by rivals, whilst the second risks undermining the financial basis of the business. Only the third - raising productivity - can help overcome the challenge in a way that keeps you competitive and sustainable.
Enhanced productivity can come about through big, dramatic shifts in how a business operates, but more often than not - and certainly in most service businesses - it’s about the small improvements which, taken together and continuously developed, transform a company. That might be replacing a manual booking system with an online one, allowing an administrator to focus on other tasks. It could be reducing the number of meetings that take place in a week, with a shift towards fewer, more-focused, meetings. Or it could be as simple as adopting a non-email internal communication system, so people spend less of the day in their inbox and more of it focused on key tasks.
Boosting productivity doesn’t have to cost a lot - often, it costs very little and the gains are significant. But where investment is required, the Chancellor provided more support in his Budget: a higher annual investment allowance until March 2023, more R&D investment eligible for tax relief (providing it is spent in the UK), and more investment in skills. Effective leaders should seize these opportunities - and others - to make their businesses more productive, more competitive and fit for the future.