Jeremy's Blog 19th November 2021: The Need for Good Businesses
This article by Jeremy Moody first appeared in the CAAV e-Briefing of 18th November 2021.
The national, rural and agricultural economies need more good businesses to face the expected challenges of this decade.
For all the developing policies and larger national objectives, the economy and so living standards and public services rest on improving business performance. That means providing what people will pay well for, doing so efficiently with the greatest ratio between outputs and inputs – a definition of productivity that puts breakfast on the table. As the Nobel prizewinning economist, Paul Krugman, put it:
“Productivity isn't everything, but, in the long run, it is almost everything. A country's ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.”
Yet productivity improvement in the UK has been languishing, absolutely and relative to the world economy. While that relative decline might be gentle, it shows when times require hard choices whether over the health service or energy procurement.
Improving productivity is typically discussed in terms of improving skills and investment, now particularly in the new technologies, but really requires openness to innovation. That is about people and the right frameworks that enable and encourage progress and so can be reduced to the WHO and the HOW of farming. Ultimately, it is the right people who will better manage how the business develops. For farming, giving the right people the best chance of access to the land they need is critical.
That larger point has just been made for the national economy in a new report, Business Time: How Ready are UK Firms for the Decisive Decade? It finds that the top 10 per cent of firms are 16 times more productive than the bottom 10 per cent. That gulf is so large that improving the productivity of the bottom would do little for the economy and so it is better to move resources to good firms while businesses adapt, shrink and grow as they have always done.
Farm and estate businesses considering their approach will take decisions about business change and competing land uses. Assessing, planning and managing options, including what nature of business they have and whether to make land available to others, will call for good advice. The valuer as trusted adviser can bring a larger view and be a safe challenger, can bring specialist knowledge but see the business in the round, synthesising other specialist advice as needed. The valuer’s skills of appraisal are a key to success in this decade.