Barely a week goes by without reference in the political and business news to the UK’s productivity problem.
This productivity problem recently formed the agenda of a high-profile business breakfast - attended by the leaders of some of the UK's most successful businesses - to launch a new initiative Business Leadership for a Better Decade. The productivity issue is widely acknowledged as a major priority by the government, media, leading businesses and organisations representing businesses, such as the CBI.
The concern is that the UK’s productivity is stagnating at best and declining at worst. The implication of this is a reduced competitiveness and the impact of that on the whole business economy, especially post-Brexit.
Improving productivity involves looking at technology, and its possibilities, potential – and risks. It requires looking at business practices, systems and operations to ensure they are efficient. But most importantly, productivity is about people. Raising productivity not only requires motivated, engaged, well-supported and trained workforces but it enables businesses to reward them properly, through offering improved opportunities to progress their careers and access better salaries and benefits.
Why we need to act now
The implications of this stagnation in productivity concerns not only me, but other Fellows, (see, for example, the convening of a new Expert Group, bringing together the Carnegie UK Trust, the RSA and the Warwick Institute for Employment Research).
Research by leading governmental, private sector and not-for-profit institutions tells us that that the impact of this negative trend is visible and growing. When you consider that 5.7 million SMEs in the UK make up 99% of businesses, it’s clear they are the bedrock of our national economy and it makes these implications all the more alarming.
Here are some headline statistics from sources such as ONS, Cisco and the World Economic Forum 2019:
- £182,273 of missed annual turnover per small business in the UK
- £5,000 and growing of yearly wages lost per person
- £18bn of lost productivity because the UK’s ten “core cities” aren’t achieving their productivity benchmark
- The UK has fallen 8th to 9th in the Global competitiveness index
- The UK currently ranks 3rd last among G7, ahead of only Canada and Japan, and the gap between UK productivity and that of our competitors such as France, Germany and the US is growing
- For the last ten years, UK productivity growth has stagnated averaging around 0.2% and is now at the lowest levels since 1888
- The typical UK business takes five days to produce what a French or German firm can do in four days.
- Around 69% of UK employees work in below-median productivity firms compared to only 60% in Germany and 65% in France
If we address it together, there could be a light at the end of the tunnel.
The Expert Group’s report, expected this autumn, will be a welcome addition to our current evidence and solution base for improving productivity at a practical level.
I see our nation failing to grasp all the benefits of a vibrant and productive economy. But I believe, as an experienced business leader, there is more I can do personally and organisationally.
- The UK has more highly productive businesses than France and Germany, but this needs to spread throughout the economy; some northern English towns are among the least productive places in Europe while parts of London have the highest productivity rates in Europe.
- If the UK closed just half the productivity gap it would add an extra £250bn per year to the economy by 2025. A modest improvement in the performance of the bottom 75% of UK companies could generate £130bn of this value in additional GVA each year.
- Just 2% increase from 5% of SMEs would lead to an increase of £1.2bn in turnover for SMEs. This means more disposable income for workers, increased spend on goods and services and more tax for the treasury to spend on essential services.
Fortunately, with the productivity problem now so high on the political agenda, investment and effort is being made to address it. Solutions do exist, but it requires us all to be fully committed to thinking creatively and innovatively around the problem and, possibly, making a personal investment of time.
We know, for example, that mentoring is part of the solution. Business owners are busy, ambitious professionals with a responsibility for a workforce and to their customers. It is understandable that they often lack the time to develop their own leadership skills, review their business operations and implement changes. But with 5.7 million businesses in the UK, just imagine a world where they all, or even just some of them, could access a mentor who could support and steer them towards changes in their businesses, to help them become more efficient. The net impact on the economy would be significant.
We also know that management and leadership training to help leaders develop engaged, motivated workforces, collaborating in regions and sectors to face and resolve common issues and comprehensive analysis and benchmarking of business productivity can all make a difference.
There is so much that can be done. For me, joining the movement spearheaded by Be the Business, an ambitious organisation dedicated to solving this problem, has been a step in this direction.
Launched by the government and Sir Charlie Mayfield (Chairman of John Lewis Partnership), Be the Business is an independent, non-profit movement dedicated to addressing the UK’s productivity decline and one which I have been proud to support.
As I consider where I lend my expertise and thinking, it has prompted me to ask the broader Fellow community: what more could you do to personally improve UK productivity? The RSA’s programmes of work and the extraordinary variety of interests, experience, skills and capability that lies amongst Fellows, are a great asset in the quest for practical solutions to our shared productivity challenge.
Can you lend your time, insights, experience and skills to help bring out the potential of an ambitious business leader, through joining a mentoring programme? If this is something you would like to explore, or if you have any other thoughts, observations or ideas around the UK’s productivity challenge I’d be delighted to hear from you.