Businesses in Wales could add up to £1.36bn a year to the UK economy if they introduced a series of productivity improving measures, according to new research by NatWest.

Productivity in the UK is under increasing scrutiny following the latest ONS figures, which identified a 0.5 per cent fall in productivity in the first quarter of the year.

Despite this productivity gap, NatWest’s research found SMEs in Wales are uncertain about the actions they need to take to boost business productivity.

Even though 60 per cent of SME decision makers in the region believe improving productivity is important, 41 per cent don’t know what productivity means in practice, making it difficult for them to identify the steps to improve.

NatWest’s research, ‘Addressing the regional and sector productivity gap’, analysed the productivity of SMEs around the UK to identify potential changes SMEs can make to improve their productivity.

Despite the significant potential gains for the Welsh economy, the research found that Brexit and political uncertainty mean tackling productivity falls to the bottom of a list of key business priorities, and 21 per cent of businesses which see productivity as important, have targets in place to improve productivity.

Investing in employee benefits packages, technology and equipment and workplace culture were the measures most likely to have the greatest impact on improving productivity in Wales.

Despite this, 37 per cent of SMEs in the region said that they invest in technology and equipment, and 25 per cent said they invest in their workplace culture. Similarly, 25 per cent invest in employee benefits packages above the statutory minimum.

In terms of potential gains for the local economy, Wales has the second smallest productivity gap. The region with the least to gain from productivity improving measures is the North East (£1.10bn).

To provide businesses with guidance on how to improve business performance and work towards closing the productivity gap, the bank has teamed up with beauty business mogul Sharmadean Reid to create a Productivity Blueprint, outlining the measures which have the biggest impact on productivity and including tips and advice from other successful small business leaders across the country.

Additionally NatWest has made available £1bn in additional lending aimed at SMEs looking to boost performance through investment in productivity-improving measures.

Adrian Aurelius, chairman of the NatWest Cymru regional board, said: “From talking to hundreds of our business customers every year in Wales, we know that many SMEs struggle to understand how best to improve productivity. That’s why we’ve commissioned this research to better understand the productivity landscape and source best practice in this area to share with our customers.

“It’s crucial that banks, government, and business leaders tackle this problem head-on, and start putting measures to improve productivity into practice. Our NatWest Productivity Blueprint, created in partnership with business leaders across the country, will help our customers identify what measures they can put in place to improve their business’ productivity and performance.”