UK productivity ranks among the lowest of the major economies and needs to improve radically. Norman Blissett, consultant on board strategy and people, has some ideas how
UK productivity is dismal. Excluding Japan, it is the lowest of the G7 countries. In Germany, the US and France, productivity per hour is around 30 per cent higher than ours. It takes us five days to produce what they can do in four.
Longer hours and increased employment have produced modest economic growth since 2008, whereas UK productivity has only just recovered to the pre-crisis levels.
But incomes would soar if productivity were higher. In October, the chancellor Philip Hammond said: “If we raised our productivity by just one per cent every year, within a decade we would add £250bn to the size of our economy; £9,000 for every household in Britain.”
It’s not clear why the UK lags so far behind. Most likely it is a combination of several factors – low infrastructure investment; lack of available finance for SME investment; rise of low-paid, low-skilled jobs holding back investment in more efficient working; under-reporting of the contribution to GDP of the digital economy (ie it is not as dreadful as it appears); a big skills and education gap in key sectors such as tech; and the poor quality of UK management.
The government claims it has policies for all of these. Detractors say it’s not enough, not least due to Brexit.
Solving the UK productivity puzzle
But it can’t be left to government to solve. Leaders across all sectors can contribute by improving productivity within their own organisations. Here are some ideas how:
- First is to improve the quality of management. Evidence from the World Management Survey indicates improvement in key management practices may lead to big improvements in performance. The UK lags behind competitor countries and has scope to improve.
- Companies should invest more in skills and efficiency. Low-cost labour has delayed the need to invest. However, UK plc’s best future is as a high-skill, knowledge-based economy. With cheap labour on the decline the time has come for more companies to change tack.
- Growing evidence indicates working fewer hours can lead to improved productivity, particularly for those working over 40 hours a week. Focusing on outcomes rather than hours could make a big difference. So could more flexible working.
- In addition the cost of workplace mental ill health is enormous. High job demands with little control over how to manage workload can lead to depression and anxiety. So can putting in big effort with little reward. Companies should take concrete steps such as monitoring stress levels and ensuring employees feel valued and supported. Adopting a stress-management culture may also help.
- Finally, people should sleep more. It’s estimated sleep deprivation costs the UK £40bn and 200,000 lost working days. The biggest productivity gains can be made from those sleeping fewer than six hours a night getting a little more. Tired workers are less productive, take more time off and are less healthy. Employers can help through employee health and wellbeing programmes.
In conclusion, we can all contribute to improving our nation’s wealth. Sometimes, as with management and investment, it is about being smarter and better. With other areas it might just be about doing a little bit less, better.
Norman Blissett is a fellow of the IoD.