“The first challenge is to increase our productivity. Britain today is some 20% less productive than our main competitors and has been for years.”
Not the words of Philip Hammond in his autumn statement but those of Gordon Brown in his pre-Budget report 19 years ago.
“The productivity gap is well known, but shocking nonetheless,” Hammond said on Wednesday. “It takes a German worker four days to produce what we make in five, which means, in turn, that too many British workers work longer hours for lower pay than their counterparts.”
His comments, and their symmetry with Brown’s despite two decades between them, show the problem of productivity is an enduring one.
Productivity is the rate of output per unit of input, or in other words the value of products made or sold by a worker in an hour of work. As Brown’s comment shows, lacklustre productivity has hung over the UK for years. It has become more pronounced since the financial crisis, however, with an expansion of the workforce and a fall in unemployment not met with a proportionate growth in GDP.
The government’s autumn statement document states that improving productivity is the “central long-term economic challenge” for the UK and pivotal to increasing wages and living standards.
Hammond has identified better infrastructure, technology and skills as the foundations for doing so, which is why he unveiled a new £23bn national productivity investment fund in his autumn statement.
Economists, however, said the government needed to do more than fund new infrastructure projects. Yael Selfin, the head of macroeconomics at KPMG, said: “It is a pity that there was not more focus on education.
“If the government intends to make the UK less reliant on non-UK workers post-Brexit, the readiness of the local labour force will need to improve.”
Poor management costs the UK economy £84bn a year, said Ann Francke , the chief executive of the Chartered Management Institute.
“Our businesses are operating in a period of great uncertainty. This makes it difficult to plan ahead and affects how we resource and develop our employees,” she said.
“It’s tough to attract and retain skilled managers, and we need 2 million more by 2024. So we know that building management capability is critical for growth in the UK and we hope that the welcome focus on productivity will include the need to improve our management structures.”
