GDP not a ‘relevant measure’, say UK SMEs
As the official measure of the UK’s economic performance suggests a return to pre-recession levels, research today reveals that the majority of small and medium-sized enterprises (SMEs) believe that gross domestic product (GDP) is irrelevant and does not reflect the true business environment.
The UK GDP – the official measure by which economists, analysts, financial institutions and the Government assess the health of a country’s economy – grew 0.8% in the last quarter, 0.2% ahead of its pre-financial crisis peak.
But a survey of 1,000 SMEs by business funding provider, Bibby Financial Services, has found that only one third (34 per cent) would describe it as a relevant measure of the health of the economy.
Edward Winterton, Commercial Director at Bibby Financial Services, said: “It’s interesting that while the quarterly GDP announcements are eagerly anticipated by the government, economists and bigger businesses, small businesses – the engine room of our economy – don’t feel it is an accurate reflection of the business environment in their local areas.
“For many of our business customers, an indicator of activity in their region or sector is more relevant than the broad, macro-economic view. GDP undoubtedly has its place as an indicator but this research suggests that businesses in the UK would value analysis on a more local level.”
The Office for National Statistics publishes Gross Value Added data (GVA) which measures regional output - but its widespread use as an indicator is relatively limited. GVA figures are published annually rather than quarterly and statistics relate to the year previous.
“For businesses, understanding regional economic performance is likely to be more useful in a practical sense. Using a regional measure – like GVA - alongside GDP on a quarterly basis would offer a more holistic, macro and micro-economic view, which would reflect local business environments more accurately”, Winterton added.
LS Contracts provide interim, temporary and permanent staffing services across a variety of industry sectors, specialising in the provision of permanent and contingency labour to the logistics and construction sectors.
Jane Eggleton, Director of the Milton Keynes-based business agrees that GDP doesn’t capture the information most relevant to her, or her clients’ businesses. She said: “It’s good to have an idea of how the UK economy is performing but in reality, it doesn’t mean a great deal to a lot of the businesses on our books. What matters to us and our clients is how things are locally and whether there is work in a particular region, in specific sectors.
“Having a regional performance measure - and measurability by industry sector - would be much more relevant and may help to encourage more businesses to take an interest in economic announcements.
Furthermore, if this data were more readily available, some businesses may be encouraged to move into areas which suit their industry type better”, Jane concluded.