Report finds manufacturers struggling with productivity puzzle

The Understanding the Puzzle report from Lloyds Banking Group and the Manufacturing Technologies Association canvassed the views of more than 1,500 businesses across the UK.

The report found that 59 per cent of manufacturers recognise productivity as an issue for the UK economy, but as few as a quarter (28 per cent) believe it is a problem for their own businesses.

While two thirds say they have a plan in place to improve their productivity, 19 per cent do not have a plan yet, and almost a sixth (15 per cent) say they never will.

More than half (54 per cent) of manufacturers recognised that their own lack of investment was the main problem, and 68 per cent intend to invest in their business in the next year. Of that number, 31 per cent are increasing their spend, while 35 per cent are freezing it and a tenth are making cuts.

Among those firms that are planning investment, 32 per cent plan to do so with the specific goal of improving productivity.

The main priority for investment to boost productivity for manufacturers is production machinery (44 per cent), with skills and training (37 per cent), automation (30 per cent) and robotics (12 per cent) also important.

Of those reigning in investment, nearly half cite economic uncertainty; almost a sixth (15 per cent) feel there is a lack of available skilled labour; and one in ten say they are simply unsure of the benefits any investment would provide.

Manufacturers cited a range of obstacles hindering their productivity growth, led by a shortage of skilled labour, cited by three fifths, and the quality of management in their businesses (54 per cent).

More than half said that concerns over regulation were an issue, while half cited inadequate R&D and nearly two fifths (37 per cent) mentioned restrictive labour practices.

The study also examines the issue of innovation, which is widely seen as key to increasing productivity.

Half of manufacturers say a lack of innovation is an obstacle to productivity for them and that innovation is being stifled by factors including a lack of ideas (26 per cent); their firm’s culture (20 per cent); their business’ attitude to risk (19 per cent) and a lack of skills (16 per cent).

Dave Atkinson, head of manufacturing, Lloyds Bank Commercial Banking, said: “Productivity is one of the defining economic issues of our time. The UK’s low level of productivity compared to its G7 peers remains an unsolved puzzle, and it is crucial that we seek to understand how businesses view the problem in order that we can try to fix it.

“Manufacturers do recognise that productivity is an issue for the wider economy, but this research indicates they are less convinced that it is a problem within their own businesses. While many firms do have a plan in place to boost productivity, most are not investing enough to overcome the barriers to productivity growth.

“It is hard to overstate the importance of productivity growth in securing the economic prosperity of our nation – and we must do everything possible to avoid the risk of getting stuck in the productivity slow lane. It’s encouraging to see investment in new technology and automation as a priority for manufacturers, as there is no doubt in the huge efficiency and productivity benefits this can bring for firms.”