Small business productivity continues to lag

New Zealand's small business productivity has slipped and remains below the long-term average, according to newly released findings by Xero.

Xero said in the March quarter, small business labour productivity averaged $74 per hour worked, down from $75.30 per hour in the December period.

It was broadly in line with the prior six months, but was below the long-term average of $76.30 per hour.

The data calculated the dollar amount produced per hour worked for a typical worker in a small business.

Xero country manager Bridget Snelling said the lack of meaningful improvement remained a concern.

"It's disappointing we're not seeing the kind of improvement needed to lift the small business economy," she said.

Productivity per employee also eased, averaging $9168.90 per employee in the March period, down from $9389.30 in the previous quarter, and sat close to the long-term average of $9137.00.

"For small business owners, improving productivity isn't just an economic concept - it's a practical way to grow profits and lift wages, regardless of wider conditions," said Snelling.

"There are clear opportunities here. Businesses that invest in the right processes, skills and digital tools are better placed to free up time, focus on customers, and drive growth."

New Zealand also continued to trail Australia and the UK, which Xero said reinforced the scale of the challenge.

It said while performance between Australia and the UK fluctuated in recent years, New Zealand remained consistently behind both.

"Falling behind international peers like Australia and the UK is a reminder that lifting productivity needs to be a long-term priority," said Snelling.

"The encouraging part is that there are clear levers - from digital adoption to skills and process improvements - that can help close that gap over time. Our small businesses can't afford to sit still, this needs to be a priority."

Xero said productivity levels varied significantly across industries.

Manufacturing productivity led the way with $123.50 per hour, real estate at $120.40, and construction was at $103.70.

Hospitality was at the bottom by a considerable margin at $30.60.

Xero said regional productivity outcomes were also mixed, with manufacturing-focused Hawke's Bay recording the highest productivity levels, while tourism-heavy Otago lagged behind other regions.