Budget 2015 comment: George Osborne must solve the ‘productivity puzzle’

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How is it that we, in the UK, produce on average 30% less per hour than workers in Germany, the US and France?

Instinctively, we suspect that there must be something wrong with the data. Are the Brits, who work some of the longest hours in Europe, really that inefficient? Have the French, with their 35-hour working week and restrictive labour practices, discovered some magic productivity solution?

We could argue about it for hours but that’s not really the point (and would certainly affect our own productivity).

Whatever the truth of the matter, most of us would agree that improving our productivity is a good thing and the key to creating better living standards for all.

In tomorrow’s Summer Budget the Chancellor, George Osborne, has a golden opportunity to make all of that happen. This Budget is a chance for the new government to set its economic agenda. That means providing a vision for what we want our economy to be based on and a route map for how we’ll get there.

And it is vital that the Chancellor focuses on helping British businesses tackle the productivity problem head-on if we are to remain competitive in an increasingly competitive world.

In essence, Mr Osborne must call business leaders to action around an investment plan for the whole country. Within that plan, he needs to ensure that employers are guiding their workforces on how to work smarter, not necessarily harder or longer.

George OsborneChancellor George Osborne will present his Summer Budget tomorrow (Picture: Carl Court, Getty Images)


So what does this mean in practice? The route to improving our low productivity lies in how we approach four key factors which should operate in unison: education, skills, training and technology.

The Chancellor should examine how we leverage these, taking lessons from how things are done to greater effect in other parts of world such as Germany and the US. This requires a holistic approach, looking at three themes in particular.

First, businesses need fiscal incentives to ensure better training for the UK workforce, harnessing the power of our world-class universities and investing in a nationwide programme of skills development.

More structured training is a must at all levels, including apprenticeships to help young people get the right skills before they enter the labour market and also regular training for older employees.

Let’s recognise that university is not the right choice for everyone. We need to encourage young people to see the value of vocational, skilled training as a viable alternative to higher education. There are jobs and industries out there suited to a wide array of skills and qualifications.

Above all, though, we must ensure that government, educational establishments and businesses work far closer together to bridge the current gap.

That means businesses being clearer about what they want in terms of skills. It means government being much clearer on the routes it will put in place to create those skills and making the money available quickly to make it happen.

Graduates“Let’s recognise that university is not for everyone” (Picture: Getty)


Second, we need to look beyond our own borders. Skilled migration from overseas is vital to filling the gaps in certain industries. Many students from other countries come to the UK to attend university.

The UK is home to some of the best educational establishments in the world, and we need to improve our retention of these skilled graduates, inspiring them to work here.

We are wasting our national assets if we simply use our universities to provide world-class training to overseas students and then require those newly-qualified graduates to leave the country and go home to compete against us.

Technology is clearly another key part of the solution. As a nation we spend significantly less than others on technology and research and development. In Germany, there are 1034 research and development staff for every 100,000 people. In the UK there are just 883.

The Chancellor needs to highlight the importance of business systems and technologies that will enable better work processes. Business leaders must feel compelled to help employees embrace these new technologies, rather than just settling with the status quo.  This is more than just rhetoric. We have to put our money where our mouth is.

At Hays, we made our largest-ever investments in training and technology during the economic downturn, and have experienced a significant improvement in productivity recently as a result.

For the second half of 2014 alone, productivity increased 3% in our UK & Ireland business, in stark contrast to the gloomy figures at national level.


Our approach to technology is also relevant to many businesses and industries, and can deliver similar results. Innovations might include renewing out-of-date systems, introducing  software that will streamline previously unwieldy processes, or embracing new business models made possible by the advent of today’s mobile technology tools.

In order to develop and maintain a world-class workforce, businesses need to be able to provide world-class tools.

With the right technologies in place and the appropriate training, business leaders can motivate their employees to work much more efficiently — not to mention effectively.

Individual companies’ performance can have a dramatic impact on the UK’s overall economic picture. But it is vital that businesses are united in their efforts to boost productivity.

Without direction and an appropriate vision from the Government it is difficult for businesses to take a unified approach when it comes to fixing this “productivity puzzle”, boosting the bottom line and bettering the lives of staff.

Improving overall productivity in the UK is the crucial piece of the  puzzle that will shift our economy into the next gear and put us back towards the top of the charts in terms of global competitiveness.

Alistair Cox is chief executive of Hays

Source Article from http://www.standard.co.uk/business/business-news/budget-2015-comment-george-osborne-must-solve-the-productivity-puzzle-10372307.html

July 8, 2015 |
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