iscover 
According to SME lender ScotPac’s latest SME Growth Index, one in three small and medium-sized businesses (SME) experienced higher staff attrition over the past year, while the average SME workforce has fallen from 88 full-time equivalent employees in 2014 to 51 today.
The report found the shrinking workforce is producing sharply different outcomes across the sector, with some businesses using technology and automation to improve productivity, while others are grappling with higher costs, reduced efficiency, and missed growth opportunities.
Stability driving growth
Businesses that reported lower staff turnover were significantly more likely to expand, with 15 per cent recording revenue growth, 10 per cent entering new markets, and a further 10 per cent taking on larger orders and transactions.
ScotPac CEO Jon Sutton said the findings reflected a broader shift in how SMEs were approaching productivity.
“Australian SMEs are becoming significantly leaner businesses, and we are increasingly seeing that productivity is no longer simply about workforce size,” Sutton said.
“The SMEs performing strongest are often those investing in workforce stability, smarter operational processes, technology adoption and flexible business structures that allow them to scale more efficiently.”
However, the report also highlighted the challenges facing businesses with higher staff turnover.
Among SMEs experiencing greater attrition, 13 per cent reported lower productivity, 11 per cent said they had missed opportunities to expand into new markets, while others reported higher induction and training costs or greater reliance on outsourced services.
At the same time, an equal proportion reported productivity gains, with many attributing improved performance to investments in AI, automation, and more efficient business processes.
Cash flow remains front of mind
The findings come as brokers continue to report changing funding needs across the SME sector, with businesses increasingly balancing growth ambitions against ongoing cash flow pressures.
Recent lender and broker data has pointed to growing demand for working capital facilities as businesses navigate higher operating costs, Payday Super reforms, softer economic conditions, interest rates, and rising payment delays.
Late payments have also climbed to their highest level in six years, according to recent CreditorWatch data, underscoring the cash flow pressures facing many businesses even as others position themselves for expansion.
Sutton said both ends of the market were creating new funding requirements.
“Recruitment costs, onboarding expenses, outsourcing requirements and productivity disruption can all place additional strain on margins and working capital,” he said.
“At the same time, businesses with stable teams are often looking to expand, take on larger contracts and invest in growth – and both scenarios create demand for flexible funding solutions.”
He said reliable access to funding remained critical regardless of where businesses sat on the spectrum.
“Whether businesses are managing staff shortages, investing in productivity improvements or positioning for expansion, having reliable access to working capital can make a significant difference to operational resilience and long-term growth,” he said.
[Related: Brokers urged to help SMEs as payment arrears climb]
Want to see more stories from trusted news sources?Make Broker Daily a preferred news source on Google.