Report identifies productivity gap

A new report from the Engineering Employers’ Federation claims UK manufacturing is falling behind on the fundamental building blocks for productivity improvement compared with France and Germany.

UK manufacturing is falling dangerously behind on the three fundamental building blocks for productivity improvement – investment, skills and innovation – compared with France and Germany, according to a new report from the EEF, the Voice of UK Manufacturing.

‘Bridging the continental divide’, the latest in a series of studies examining the UK’s productivity gap with the US and EU, argues that government policy should be refocused to improve investment in manufacturing – combined with action to develop skills and innovation – to close the productivity gap with continental competitors.

The EEF is particularly concerned that the number of manufacturing foreign direct investment (FDI) projects is falling in the UK while rising in France, signalling that the environment for UK manufacturing is becoming less favourable compared to elsewhere in the EU.

The report is also critical of UK government’s emphasis on removing barriers to competition as the answer to productivity growth. The report shows that the extent of competition in UK markets is greater than on the Continent and that other factors explain the bulk of Britain’s productivity gap.

The UK is, however, ahead of its foreign competitors with regard to labour market flexibility and regulatory issues, but these advantages are in danger of being eroded. The report outlines that for UK manufacturing to retain and improve the flexibility required to be competitive, action is needed both to improve the skills that underpin it and minimise regulation that can inhibit it.

‘There is no silver bullet for tackling the UK’s productivity gap with our main competitors. However it is clear that government policy needs to be refocused on improving the environment for investment in UK manufacturing, attention to which was sorely lacking in the Chancellor’s Budget statement last week,’ said Martin Temple, Director General of the EEF.

‘The UK is falling dangerously behind on the fundamentals, and while the government’s Modern Apprenticeships Taskforce, Lambert and Sainsbury Innovation reviews are welcome, without firm action to support investment in manufacturing, both government and business will fail to achieve the necessary productivity gains,’ added Temple.

The full report can be found in pdf format at: <A HREF=’’>Bridging the continental divide</A>