Tackling the productivity problem

Despite being one of the world’s largest economies, the UK has struggled to achieve sustained productivity growth in the years following the global financial crisis.

With the Covid-19 pandemic exacerbating these challenges, there has never been a more crucial time to address the UK’s productivity problem. But what exactly is holding the country back, and how can we turn things around?

The UK’s decline during the financial crisis and the uncertainty surrounding Brexit have had a significant impact on reduced investment and productivity. However, the problems run deeper, including a skills gap, outdated infrastructure, slow wage growth, and a lack of incentives for business investment.

Anyone who looks at that mix will realise that turning the tide is not easy. But there are signs that the right level of change is coming.

The Lifetime Skills Guarantee offers free education to adults without a level 3 qualification, enabling upskilling and retraining for changing industries.

With the rise of artificial intelligence and digital tools, and the fourth industrial revolution underway, reskilling is crucial for positive change.

Infrastructure is seeing major investment too. The rail network has more money going into it than at any point since the Victorian era, not just to allow for passenger growth but for freight growth too. The same goes for roads, air and sea ports – all seeing significant upgrades to ensure that the logistical backbone is robust.

The incentives are returning, with full expensing announced at the latest Budget to follow on from the Super Deduction. And political stability has returned.

Which just leaves wage growth. Since 2010 wage growth has been sluggish, with it being easier to hire people than invest in productivity improvements.

But the two need to be balanced. As wage growth increases, so too will the desire to invest and find new ways of getting greater output.

My question back to Lancashire’s businesses is – is this enough? And if it’s not, what more can we do together to turbocharge our productivity growth?