Poor productivity record costing British economy £111 billion

A new global study from Proudfoot Consulting suggests that the UK’s poor productivity record is depriving The Treasury of more than £111 billion in lost revenue.

The nation’s poor productivity record is estimated to be depriving The Treasury of more than £111bn in lost revenue and the UK is falling further behind its main economic rivals. These are some of the chief findings in a global study of labour productivity by Proudfoot Consulting released today.

Entitled ‘Untapped Potential – the barriers to optimum corporate productivity’, the study is thought to be unique since it is based on data from the micro-economic perspective of a single business unit or company. It comprises 1,357 analyses of companies in nine countries, plus an opinion poll of 2,700 chief executive officers.

The study reports that poor planning and inadequate management is still the key reason for the majority of time wasted in the workplace globally. In descending order of importance, the other reasons identified were: poor working morale; IT problems; poor communication; and inadequate qualifications.

Taken together, all these factors reportedly account for the loss of 92 out of a total of 225 productive working days per company in 2002. The UK fares worse than average, with 110 days out of 225 lost, compared to France (97), Germany (83) and the USA (86).

Commenting on his company’s findings, chairman Kevin Parry said: ‘The factors that hold companies back from achieving their true potential are common across all countries.

‘They can be addressed quickly and without major capital investment, but chief executives often don’t see productivity improvement as a priority, and continue to set very low improvement thresholds for their businesses. More worryingly, three-quarters of British CEOs try to get by without external help. Unless this changes, Britain’s productivity gap is in danger of widening into a chasm.’

This year’s findings again show that poor planning and controlling of work is still a major cause of lost productivity, and the British are getting worse. In addition, IT problems increased from 7 to 10% as a cause of lost productivity in British firms compared to 2001. This indicates the rising dependency that companies place on IT systems for efficient operations, and could partly be explained by technical snags with enterprise resource planning and customer relationship management (ERP/CRM) software.

Conversely, poor working morale declined as a factor affecting productivity, perhaps as a result of the ‘feel-good factor’ created by the combined effects of The World Cup, The Queen’s Golden Jubilee and a general sense of prosperity many workers are experiencing owing to reduced mortgage rates and the rising value of equity in their homes.

In a separate opinion poll, Proudfoot Consulting canvassed the views of 2,700 CEOs, including 300 from the UK. The overall picture is one of a declining rate of productivity growth. In the UK, when asked to predict the level by which productivity would increase during 2002, the average response was 3.4 percent.

The TUC’s chief economist Ian Brinkley has been involved in formulating joint CBI/TUC recommendations on productivity improvement to The Treasury Department. Adding his assessment to those of Professor Crafts, he said: ‘The picture painted by these findings fits in both with what the statistics are telling us and a wide range of evidence on the underlying causes of poor productivity performance in the workplace. The productivity gap with other advanced economies is a major economic problem but also represents a huge opportunity to catch up with the best in the world.’

Copies of the full report can be downloaded directly from <A HREF=’ http://www.proudfootconsulting.com/’> Proudfoot Consulting</A>