UK Productivity Stats – Are we really falling behind?

Although not widely reported, there were some concerning figures published by the ONS last week on UK national productivity and comparison with the G7 nations.  To quote "Output per hour in the UK was 15 percentage points below the average for the rest of the G7 industrialised nations in 2011, the widest productivity gap since 1995".

Not only that, on an output per worker basis, UK productivity was 20 percentage points lower than the rest of the G7 in 2011. Whilst this productivity measure grew for the other G7 countries last year, it remained flat for the UK.

What is happening to our workforce that apparently makes it relatively so behind the productivity of the other major world economies?

One explanation of course is that we genuinely work less hard or produce less efficiently than the rest, but whilst that might make a good tabloid headline, I don't think it tells the story. The CIPD has been noting for a while that there is some evidence of labour hoarding. That is companies holding on to people with vital skills and experience even if there isn't all the work available for them. Having gone through the fat, we're down to the muscle.

Another view is that we have quite a lot of people working part-time, either voluntarily or more importantly for the productivity numbers, involuntarily. There is evidence of self-employed people only having enough work to work part-time, but also stories of companies keeping people on full pay but not requiring them to come in to work every day if there isn't enough demand. The Vauxhall plant at Ellesmere Port was applauded by many for doing this and implementing a kind of payback system whereby in effect a negative overtime balance is built up and when the demand returns, workers would be expected to work off this paid hours debt.

It is notable how the US appears as the standout nation in the G7 for its productivity numbers. Easy access to finance to fund small businesses and help them grow is a factor that many economists will point to, but what the statistics and some underlying causes also clearly point to is the need to increase demand. That needs businesses to innovate and grow, and a Government with a clear industrial strategy for growth and support to the business community.

So, a subject worthy of further debate and exploration. If it's really true that we are 15 or 20% less productive than the other large global economies, then we should be worried.

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