Over the last several years, productivity growth has been sluggish in many developed markets. The World Economic Forum reveals that while digitalisation has been a game changer for some firms, not all businesses have been able to reap the benefits of digital investment. New technologies, including AI, may offer a new boost for certain businesses, but identifying the areas with the biggest impact on productivity is critical.
Ian Pascoe, managing partner at Grant Thornton Thailand, explains, “Over the last 20 years global productivity growth has been virtually stagnant. It has either flatlined or, even worse, actually declined. This is all during a period where we have had some of the greatest technological changes ever seen, we're more connected than we've ever been, and yet that has not led to an increase in productivity. Firms making investments in these areas really need to think about how it will impact productivity, because so far it often hasn't happened as business leaders would have hoped.”
Investment in technology remains the investment priority for business leaders at 57%. Meanwhile, only 44% of firms see investment in plant and machinery as a key priority and investment in new buildings remains at the bottom of the list, cited by just 36% of businesses (down from 40% in H1 2022).
Business leaders’ fears over a shortage of finance have eased somewhat over the last year, but for many it remains a real concern. Just under half (47%) of business leaders cite access to cash as a constraint on their growth, compared to 50% in the second half of last year. However, when it comes to R&D and technology, business leaders can benefit from making smart, selective investment decisions.
Sasha Kerins, tax partner at Grant Thornton Ireland, explains, “The scarcity of resources and talent globally means businesses all need to do more with less. Investment in technology and R&D across all sectors is paramount for doing so. The pandemic saw an exponential acceleration in how we use technology in both our work and family lives. This acceleration is set to continue, and those businesses investing in R&D are the most likely to succeed. To manage their cost base, Irish businesses are being more selective to ensure R&D is market focused, delivering for end-user demand. Ireland is perfectly placed to support innovative R&D projects given our effective tax relief for qualifying spend.”
Oupa Mbokodo, head of advisory at Grant Thornton South Africa, notes, “It rarely makes sense to hold back on investment during an economic slowdown. The bigger risk for businesses is that, when the uncertainty ends, you may be behind your competitors. Business leaders may also miss out on an opportunity to create (invest in) new revenue streams. While it is important to hold on to cash, it is equally important to have a robust investment strategy for an organisation. You need to understand the market in which you operate, understand the cycles of the economy, and know exactly under what circumstances your specific organization can thrive.”
