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We need to bridge Britain’s productivity gap

7 December 2017

5:01 PM

7 December 2017

5:01 PM

The UK has a big productivity problem. Our slowdown since the financial crisis has been more severe than in other developed nations. We rank third-last among the G7 — ahead of only Canada and Japan — and we’re falling further behind our competitors: France, Germany and the USA. This matters, because increased productivity is the key to improving living standards. Without it, businesses underperform, we fall behind competitors and, ultimately, our ability to increase pay, invest in public services and improve living standards is limited.

Government sets the agenda for productivity in areas like skills, infrastructure and research and development. We’ve seen encouraging moves in the Budget and an industrial strategy white paper, but it could be years, if not decades, before we see results, and we can’t wait that long.

Fortunately, research exists that points to a quicker solution. Analysis by the Productivity Leadership Group, supported by McKinsey, shows that although the UK has many innovative businesses, all sectors of the economy also have a ‘long tail’ of those with productivity levels far below their potential. This disparity between ‘the best’ and ‘the rest’ is greater than in France or Germany. (Two-thirds of employees in the UK work for under-performing firms against 55 per cent in Germany.)

There is powerful evidence to suggest that issues of leadership and management lie at the heart of this disparity. Research by World Management Survey shows a direct link between management practices and output, but the lessons on how to manage better are not being spread out from those highly productive companies to the rest. That’s why in a survey of global management practices, the UK scored 3.02 out of five for best practice, behind America, Japan and Germany. So, what can we do? You can’t just pull a lever to spread best practice around the slower firms. Rather, it’s down to businesses themselves to learn, and to teach. That’s why, with the support of government and some of Britain’s leading companies, we’re doing something that’s never been done before: launching a business movement that engages thousands of firms across every region and sector to increase their own productivity and thus the productivity of others around them and the UK overall. It’s a movement we’re calling Be The Business.

We want every business to measure how it is doing against leading business practice, because most companies surveyed believe that it’s other people that have a productivity problem, not them. We want them to work out improvement plans, learning from the hundreds of case studies and tips we are pulling together. We want them to then put the plans into practice, leading to recognition and reward within their own supply chains and business communities.

If every firm made just a 10 per cent improvement in key management practices (leadership, future planning, talent management, digital skills) we then think this would generate more than £100 billion in economic growth annually. This is not just theory from a textbook: it is already happening. At Cumbria Crystal, managing director Chris Blade came on one of our Productivity Through People training programmes. He went back to his firm and gave staff a target of a 1 per cent productivity improvement per month, based on analysis of what the firm wasn’t doing in terms of best practice. He doubled turnover, quadrupled his profits and landed Bentley as a client — all by doing things that every business can do.

There is a huge prize to be won here. If the UK closed just half of its productivity gap we could add an extra £250 billion per year to the economy by 2025. We’re calling this a ‘movement’ because we need many businesses to make small changes which, in aggregate, will improve productivity and, ultimately, national prosperity.

This country has an awkward relationship with patriotism. But it has its time and place — we all remember London 2012, when the whole nation reclaimed the Union Jack. Well, more than ever, British businesses need to become world-class, and we will be happy to fly that flag. We’ve had ten years of flatlining productivity, so if not now, then when? Government can’t fix it alone. Neither can the economists. It’s down to all of us.

Tony Danker is chief executive of Be The Business.

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