The chancellor’s ambition to make Britain the richest of all the major economies by 2030 has moved forward with the publication of a 15-point productivity plan.
Launched today in Birmingham by Sajid Javid, secretary of state for business, the plan sets the agenda for government to reverse what it describes as the UK’s long-term productivity problem whilst securing a rise in living standards.
“Productivity is something we’ve been hearing a lot about recently, and that’s because it’s one of the few areas of the economy where Britain is struggling,” Javid said in a speech. “Britain is home to some of the world’s most innovative and dynamic businesses, staffed by incredibly talented, hardworking individuals. Yet our productivity – the rate of output per hour worked – is well below its potential. In stark terms, it now takes a worker in the UK 5 days to produce what his or her counterparts in Germany can deliver in 4.”
The 15-point plan is centred around two angles of execution that aim to encourage long term investment and promote a dynamic economy.
According to the department of business, innovation and skills (BIS), this will be achieved in part by making long-term investments in business by cutting corporation tax and fixing the Annual Investment Allowance at £200,000; investing in skills by introducing an apprenticeship levy; and investing in the Northern Powerhouse and supporting infrastructure.
Further measures include investing £6.9bn in the UK’s research infrastructure and developing the UK’s network of Catapult centres for commercialising technology and making changes to planning rules to speed up development on brownfield sites.
Commenting on today’s announcement, Nick Baveystock director general of the Institution of Civil Engineers said: “This is a sound approach to improving the UK’s productivity, with infrastructure – a catalyst for boosting growth, skills and innovation – rightly placed at its heart. Government also articulates well the problems with our infrastructure and barriers to enabling these benefits, and the proposed National Infrastructure Plan for Skills will form a vital piece of the puzzle.
“We now need to see this vision translate into action – shifting things to the next level. While the renewed commitment to many initiatives and policies is welcome – actually achieving the ‘lasting change’ Government aspires to will depend on decisions being made and ultimately, implementation.”
Terry Scuoler, chief executive of EEF added: “For the UK’s productivity performance to go from stumbling to soaring during this parliament we need solid policy foundations to support the efforts of investment-intensive and highly productive sectors – like manufacturing – to thrive and expand. The new administration’s promise of a whole government focus on productivity and boosting the levers of growth is an encouraging step.
“Launching this plan in the Midlands, the business secretary was right to draw attention to how government and industry working together with an industrial strategy can, in part, help our key sectors like automotive become global productivity leaders.”
Full details of the productivity plan can be found at this address: http:/www.gov.uk
I do not have the up-to-date statistics to hand (I am sure they make torrid reading) but having watched the following (*) industries virtually disappear in the UK during my 50 year career, I do occasionally wonder just where (and even why?) this increase in productivity is to be achieved.
(*) Machine tools
Textile machinery
Domestic appliances -so called white and brown goods
Textile and garment manufacture
Shoe manufacture
paper printing and machinery to do so
Coal Mining and ore preparation
Small wares (screws, nuts, bolts, nails)
Specialist steels and other alloys creation
Clocks and watches
Photographic equipment
telephonic equipment and its modern enhancement(s)
Computers and screens
During this same period, the number of (and persons employed in) banks, estate agents, insurance brokers, retail consortia, lawyers and accountants, (even clerics!) distribution networks, fast-food outlets, shopping centres, meja -advertising and editorial, marketing and sales consultants…you get the message…. have increased almost exponentially. By what stretch of who’s imagination do any of these groupings act productively? Answers on a post-card (if there is any printing of ‘paper’ being done now.Will it ever end?
Perhaps this is all part of the master plan? To
Only a glance of the productivity plan suggests that whilst talking up new initiatives (ie fiddling with tax and investing in skills), there is no mention of actually identifying unproductive industries (both ‘productve’ in Mike B’s terms (ie making things you can drop on your foot) or ‘productive’ services.
In previous recessions ‘dead wood’ organisations or whole industries have been (usually painfully) restructured or disappeared altogether, ultimately producing a stronger economy overall. In this crisis – through retaining employment working at low levels of productivity – and propping the economy up with Quantitive Easing (QE) – we have avoided restructuring and the government dishonestly pretends that we are doing much better than our competitors.
I would propose that we identify poor – under productive organisations in both manufacturing and services (and ‘manu-services’) and then work out what to do with them. Money spend on retraining and transferring workers to more productive areas or some other policy may then make some sense – although until we do the productivity analysis it’s too soon to plan or make policy
Just for personal interest,
As some-one who has visited and purchased from Switzerland, Germany, France and Italy. I often wonder if the measure of productivity is not somehow (Financially) skewed in the UK as opposed to much of Europe. Is “In stark terms, it now takes a worker in the UK 5 days to produce what his or her counterparts in Germany can deliver in 4.” physically true or only fiscally so?
Do cars of roughly the same quality and complexity come off a German line 25% faster than they do off the line at say Cowley (German Marque), Swindon or Washington (Japanese Marque)? or is it just that the tax and rates and the definition of a line worker differ between the UK and some other countries, If the line at Castle Bromwich runs at 100m/hr does a similar line really run in Stuttgart at 125m/Hr? Do they really run 5 lines with the number of assembly workers that Land Rover can run only staff 4 with. Is it really true that 1Million Workers in Germany actually produce 5Million Tonnes of Stuff in the same time as a similar 1Million workers in the UK Produce only 4 Million tonnes of Stuff? or is this more a statement that a worker in Germany costing $125 produces $5 of Value added where a UK worker can only produce $4 for the same input? Which might be influenced by a lot of other factors other than the individuals output, even ignoring the machinery/automation available to them.
I ask this because I used to work in a UK production, environment for both a plastic IM containers manufacturer and a different sanitary ware producer both of which had French (very high productivity even compared to the Germans at the time) and Italian sister companies and suppliers, in both cases the lines did not run any faster, or with fewer staff (the French actually had significantly more staff) but both were able operate more cheaply, and the only real differences were pay and space, ie for a similar production capability the Italian firm was 4 times the floor space and the French containers company 3 times larger. It has always bothered me that even if it is true that lines run faster in Germany, and we could somehow increase the numbers of car doors one person/robot/fixture could fit in a day or whatever direct measure you could take could be matched or exceeded that the accountants would remove this parity/advantage to account for the rates, or floor space costs, or material depreciation, or transport cost or expected profit margin.
I am not an accountant and have less desire to be one than even MikeB above but I am concerned that the direct comparison of different taxation and reporting regimes is not be possible without much fiscal fudging by statisticians and economists and that those fudges might not be totally accurate. Bear in mind no manager wants to run a company inefficiently not even The Coal Board, British Rail or British Steel but sometimes the fault is not with the management it is with the Governmental environment.
Oh how the purveyors of political rhetoric love throwing around words like productivity without any attempt to define them. What does “rate of output per hour worked” really mean. It is easy enough to define some sort of productivity measure for an individual company but not for the country as a whole. How do you compare a firm making millions of widgets per hour with one making a powerboat per fortnight? We all want our businesses to be more efficient, more productive and more profitable but trying to come up with some national figure for “productivity” is fruitless. There is a temptation to believe productivity is “shop floor” productivity or widgets per hourly-paid man.hour but that is only part of the story. In the past two decades I have watched shop floor productivity improve (by automation, better practices, etc) but overall productivity decrease. This is due to the increase in non added value activities – more management, more analysis. more spreadsheets, etc. Everybody is busy but less value is added to the business. If we really want to improve productivity it is to these area that we need focus our attention. One word of warning though – Improved productivity and the political myth of a job for everybody willing to work don’t make good bedfellows!
Frederick & paul’s comments are correct.
no manager wants to run a company inefficiently… it is with the Governmental environment.
As I have had occasion to point out before: unless I am mistaken (and my lecturers all those years ago mis-informed me) the ‘Laws of Science’ are virtually the same (I will allow some altitude related changes!) in every country. Tokyo, Tubingen, Toledo, Tunbridge wells…you get the idea. So, as F&P point out, this cannot be the reason for any difference in skill level, and productivity.
I do NOT wish to over-burden fellow bloggers but a short piece from a book, written by a young engineer well known to me: and about a period he spent assisting the improvement of productivity of a large textile mill in Kursk, USSR may place some of this into context. Available by direct contact to mikeblamey@yahoo.co.uk.
If readers want more: Francis Spufford’s “Red Plenty” [he also wrote “Back Room Boys -the story of boffins!] describes a similar difficulty in a society , the USSR that was then totally run by civil servants!….provides it.
I would contend however, that there are several vital (so they would have us believe) elements of our society which deliberately extend, complicate and control matters to enhance their earnings! The very reverse of capitalism and completely devoid of any of the pressures of the market place!
Mike B
I confess to feeling as cynical about the UK productivity as the previous correspondents. My working-life experience has been of industries disappearing (or being sold abroad if profitable), although the recent re-vitalisation of the car industry seems to fly against that, but who owns that ?
Does productivity mean anything if the balance of trade is continually negative? Ask the Greeks!
@Frederick the Average
Perhaps car plants are a bad example, as the UK tends to be very competitive in this field.
However, in other areas, productivity is the inverse of employment. The line in France and the UK will run at the same speed, but lets say you want to feed material into the line, and you have a choice of hiring a few guys to do the work, or buying a machine for a couple of 100K to do the job.
Not always, but in France, you do not want to employ anyone. They cost a lot in wages and taxes, and you can’t get rid of them. The cost structures push you towards a machine, and with it higher productivity, and a couple of jobs fewer.
In the UK, labour is cheap. Why not hire a couple of guys on minimum wage. If production falls, their easy to get rid of, or have them on zero-hours contracts.
In some respects, the UK has been lucky to have negative productivity growth over the last recession, as it’s kept employment up. (Productivity x Employment = National Output).
Now that the economy is growing and employment is high, it’s time to focus on productivity. In this respect, the new living wage could actually help, by forcing employers to give more weight to productivity.
As our financial services and economists (especially) like to inform us … it’s all about risk. Rather self-defeatingly, it is predominantly short-term focused! The ‘more instant, the better’ is the consumer’s consensus.
Our elected politicians need to think radically differently from the past and ‘outside the box’ that is Westminster. Perhaps electing more politicians (together with their advisors) with real Engineering backgrounds could formulate a cross-party long-term industrial strategy for the country. Only issue being that Professional Engineers in general have a relatively low status in Britain hence, not generally listened to!
I might hasten to add that doing more analysis and writing more reports is but a mere fraction (if at all) of increasing overall productivity. Having said all of this, when short-termism overrides long-termism, there comes a time (like now) when only short-term solutions are possible … a stupid and terrible situation to find ourselves in.
Again no definition of ‘ Productivity ‘ – what else do you expect from an organisation ( I use that word advisedly ) known as the UK parliament, where there has been no change in ‘ productivity ‘ in centuries. For instance to hold a vote – the ring a bell – some are located in nearby pubs nnd restaurants – to call the ‘ honourable members ‘ to the vote.
Many of whom have not listened to or taken part in the debate on the subject which they are to vote on.
Next, they queue in lobby and are ‘ counted through ‘ a yes or a no door -their names being carefully taken to see if they have performed as demanded by the whips, PM or Chancellor. If not – well that’s their promotion down the tubes.
This process takes at least half an hour – in the 21st century -‘ Productivity ‘ don’t make me laugh – it’s a word they learned from a book and nothing more
Jaycee
Ah, but its tradition! Not only does it take half-an-hour to have a vote: every member has their own personal ‘peg’ (for their coats and hats) but on each peg is a small loop of red tape (I kid you not!) for members to attach their swords to: so as NOT to take them into the chamber.
The distance between the two red lines on the green carpet in the Chamber that separates the two ‘sides’ is ‘two-swords’ lengths and a foot!’ for the most obvious reason!
It might take only 30 minutes to actually conduct the vote (when it could take 30 seconds to do so electronically?! but as the ‘side’ that played the greatest ‘conn’ in winning the election… knows the result already …(because the Jury of Purchased persuasion has been bribed-in the manner Jaycc described with future baubles…) it does seem odd that such continues. If our leaders wish to reduce the cost of politics( start at home?)
lets be honest: notwithstanding some rather unkind comments from Cynical Old Engineer…I believe no properly trained, educated and skilled Engineer would continue with this type of farce to make such momentous decisions within any organisation for which they had responsibility for another day!
Productivity and its enhancement.-
demonstrated by the latest ‘attack’ by HMG on our medical/technical colleagues.
We are getting close now to what I do believe is the ultimate absurd circumstance. Our individual and national future(s) are to be/are being decided by special? persons and small groups-part of a jury of purchased persuasion: who have negated/eclipsed (for themselves) any pressure from the market-place or the disciplines of capitalism and democracy (the once every 5 years con is hardly democratic)- indeed jumped-up clerks masquerading as professionals would be a mild description of most of them: and indeed their banking, accounting, retail, biased meja associates and confidants…
who do so using systems and procedures which demand them to look backwards all the time for precedent (rather than as those of us fortunate to be trained in the sciences and the application of technologies do – forwards with inspiration) and
who then believe that it is their place to tell the rest of us to ‘pull-OUR-productivity-socks-up.’ Bl**dy cheek from persons/clerks who are in ‘places and positions’ well above their intellectual limits and proper stations in society.
I say, enough is enough! Mike B
I have a slightly different, and perhaps more optimistic perception of our ‘recent’ productivity crisis.
Being that employment has been bolstered in the last 10 years or so by the government’s policy of encouraging people into self-employment instead of applying for benefits when made redundant/got fired/pensioned off etc. I suspect this has had an impact on the numbers.
And whilst perhaps not hugely significant, it might address at least single figure percentages of the overall figure. After all many small businesses have been established and most simply provide a living. Productivity, is just not a term they recognise as most are operating on very low incomes, long hours, with inadequate reporting.
Nor is this a criticism, we can’t expect long term employees with a single focus to become conversant with all the skills needed to run a business overnight. I suspect what we’ll see, as a natural consequence of the ‘self-reliance’ initiative, is that in 10 years many successful small businesses, run by determined individuals will flourish and prove to be precisely what this government has been seeking, examples of self-reliance rather than our historic rush to the dole office when things get rough.
In the meantime, productivity will be an issue until unskilled businessmen learn the rudiments of company organisation.
And I think the productivity stick is the wrong implement to persuade people to do better, for themselves as much as anyone else. It’s my belief that some people simply don’t want to be successful. They simply want a job that pays enough so they can afford a pint on a Friday night and to take their kids to the football on Saturday. My fear is that rushing round the country banging on about productivity misses the point of living, which is to do so happily.
Perhaps we haven’t done too badly so far, crime is falling, employment has been improving, and strikes are almost a thing of the past (although now nationalised industries are history that’s to be expected). Education may not be the best in the world on a qualification analysis, but as I mentioned in another post, we don’t teach our children by ROTE.
And there perhaps lies another element of lower productivity. We are a nation of eccentric individuals who operate together, largely well, but woe betide an outsider threatens our culture. And whilst it is constant evolution, no more so perhaps than over the last 20 or 30 years, it is our culture, no one else’s and we thrive on a siege mentality when provoked.
So whilst many nations are largely influenced by accountants and statisticians, we maintain a healthy contempt of being herded and counted. More a nation of industrious, haphazard squirrels than one of efficient milking cows. Is there a measure of daft inventions, and I wonder where we would come feature on that list?
Our industries are gone, never to return, long live King intellect. But is that fair?
Well, is it fair to have us all exist on Chinese or Indian wages simply to compete in low level jobs making widgets by hand? If estate agents exist and make money, it’s because there is someone to pay their wages, so the money’s coming from somewhere. If not factories, then where? My daughter’s studying zoology, she’ll never make a physical object in her life, but she’s in demand when she graduates and she’ll pay taxes into our community. Is that wrong?
As far as who owns our companies, it’s really academic in a global environment as many investors in major companies are insurance/pension companies, banks and the like who help create jobs, generate taxes and distribute wealth in a number of ways. It’s not like there’s an evil overlord raking in all the cash.
I can see this productivity initiative falling as flat as many other political attempts to prod the British to achieve more. What does a political black eye look like?
Which country is the most powerful in the world? *UK smugly points at self *
http://www.londonlovesbusiness.com/business-news/politics/which-country-is-the-most-powerful-in-the-world-uk-smugly-points-at-self-/10687.article
Contrived? Skewed? Self promoting? Perhaps, but any publicity is good publicity, particularly if it’s good publicity!
“…..If estate (and all the other?)agents exist and make money,”
David R: Look strategically at this and perhaps you might find some merit in my constant assertion.
That every society has (what we used to call entropy/enthalpy in ‘heat engines’ studies!) so much physical and intellectual skill and effort within it: That is a measure of the available energy in a system. [A country/state/society is surely as good an example of a system (even if more complicated) as any in Engineering.
My constant concern is that far too many might make ‘money’ out of what they do: but is that creating wealth?
Five sets of highly intelligent educated persons making money/a living from dealing with disputes (every one, large or small and guaranteed payment whether they succeed or not!)
Just think how much (of other peoples?) money every estate agent, financial consultant, pensions advisor, insurance broker…the ‘agent’s list is endless…’makes’ from their contribution….but is it creating wealth for UK plc? and is such activity enhancing the ‘asset’ of UK plc.
Hardly, if these persons (as they do) buy cars, holidays, food, from overseas and even ‘stack’ their ‘profits’ there?
I recall a comment from somewhere that 1Kg of steel can either be turned into a door-stop (value £1.00) or the cases and mechanisms for 20 Swiss wrist-watches (value £500 each) ie the value added from the labour ‘added’ to the equation is dramatically improved. And watches are bought by individuals with their own money? Sadly I see far too many door-stops and not enough watches being made by UK plc. Oh I forgot: we also make ammunition out of steel . HMG buys this on our behalf: using the taxes we pay (or sadly the money they borrow on our behalf…?) -once again no value added whatsoever.
Henry Ford famously remarked that ‘he knew 50% of all his advertising and marketing expenditure was wasted: unfortunately he did not know which 50% that was’.
Might I suggest the same comment/question might be posed about expenditure on most other things that HMG buys on our behalf.
Just as an aside: as the Defence Secretary,F allon has instructed the MoD to sell off old stock to sharpen-up the front line ?
Thatcher suggested the same in the 80s: amongst apparently redundant uniforms were hundreds of thousands of ‘desert camouflage patterned’ ones.
No prizes for guessing which Middle-East country bought them. Yes, that one!
Citizens might have wondered why it took so long to get the various Gulf Wars started?
Because ‘we’ no longer had uniforms of the appropriate pattern! Several textile and related firms had a bonanza for months. The one benefit was that when the shooting started, it was easy for ‘us’ to recognise the opposition wishing to surrender: they had our old uniforms on!
But take comfort; boots for Napoleon’s armies (yes that long ago) and LMG’s for those dreadful folk who invaded those islands in the S Atlantic.. were from us too!
This (self-delusion) is what politicians do to divert attention away from their failed policies.
Mike Blamey goes straight to the heart of the issue. No economy is truly ‘productive’ if it fails to manufacture the core products of an industrialised society. The dominant feature of the Industrial Revolution was investment in innovation, but that lost its appeal when the damn foreigners learnt to manage the process better than the risk-averse Brits. Britain never will be ‘great’ again on a diet of service industries, management consultants and financial chicanery.
As for manufacturing added value: 1 million kg of steel (and/or concrete) can be used just to hold up an offshore turbine (contributing zero MWh to its productivity), or it can be turned into a wave energy converter AND energy storage vessel. Total integration could transform the performance of marine renewables. A consequential disruptive technology entails the obsolescence of sea bed fixed HAWTs and their replacement with cheaper and more reliable floating VAWTs. Properly managed as a long-term investment, this would lift the UK to an unprecedented position of sustainable self-sufficiency, with a healthy balance of payments in the global economy.
Why do politicians celebrate inward investment? It means that some of the profits are likely to be off-shored (untaxed?). The lowest ‘productivity’ has to be importing the engineering we need. Do economists compute that as zero or a negative figure? The UK (foreign owned?) supply chain only gets half the off-shore business at best:-
http://www.4coffshore.com/windfarms/east–anglia-one-50%2525-uk-content-a-first.-nid2093.html
‘Taxpayers money’ should be spent on Rdd&d, informed by engineering science, not based on an ill-informed appraisal of the business case, in a failed (EMR) market. The Catapult centres will do no more than fund innovation that the private sector champions. (e.g. The capacity ‘market’ has failed to ‘incentivise’ energy storage.) Public investment needs to go directly into manufacturing industry, but the EU outlaws ‘state aid’ and rigs R&D subsidies to disadvantage SMEs (through match funding rules). Politicians prop up their bureaucratic empires or pledge to cut expenditure, or both! How much could wise, real-world (QE?) investment save in unemployment and other benefits? Secure, productive jobs, and nobody earning less than a true living wage. . . in stark contrast to the brutal first industrial revolution.
http://www.4coffshore.com/windfarms/municipal-utilities-complete-pioneer-project-in-the-north-sea–nid2091.html
“The first purely municipal offshore wind farm in Europe. . . The investors in the Borkum offshore wind farm (total figure €1bn) are 33 municipal utilities and regional providers from Germany, the Netherlands, Austria and Switzerland, as well as Trianel.”
The corrupted minds of successive UK administrations could not even entertain the scenario.
The administrative incompetence of the European Commission knows no bounds:-
http://www.eaem.co.uk/news/eu-ets-reform-polluters-pocket-€160bn-subsidies
“revenues from auctioning these permits could fill public budgets to invest in Europe’s climate-friendly economy.”
A few of us have organised (under the banner of the Big Potatoes) a meeting/meal to discuss Productivity.
http://www.bigpotatoes.org/2015/07/eventproductivitydiscussion/
on Tuesday 28th in London This is limited in numbers (so everyone can get a say) but if anyone involved in this thread or the Editorial team of the Engineer wish to attend please follow the link above. This article is on the reading list as is the govt plan.
Well, just may be the clue is in the word itself !!
Just why are the annual trade (deficit) figures always in such a sorry state?!
How is productivity calculated? The whole economy output vs the population? Or just using fractions of each? And what is “output”? Just output, or output minus input and waste?
Is the productivity higher if the state makes the monopoly rules and everybody has to buy from a certain service provider at any price they dictate without choice to decline?
For example: in Germany companies are required to do online taxation, and everyone who owns a computer that is able to access the Internet has to pay TV license fee, as he would be able to watch TV with that ATM over the Internet.