UK Productivity: What we need to ask ourselves

I’ve just Googled – why UK productivity is so low to try to get a handle on what is going on.

Andrew Smithers at the Financial Times lays the blame at the door of management incentives that act as a brake on investments in capital equipment that would raise productivity levels.

Frances Coppola at Pieria offers a wide range of potential causes including lack of investment, a low-wage economy, a risk-averse financial sector, poor management and a lack of innovation.

The Bank of England hypotheses that firms have created spare capacity by avoiding laying off staff in the hope that market conditions will improve. The bank also mentions low investment and innovation levels. Finally, there is a suggestion that firms have switched staff from revenue generating work to business development in oder to prop up demand.

Karl Whelan in Bull Market Medium wonders if it is low investment but goes on to say that most “experts” seem confused. Some are wondering if techno pessimism is not at play; the belief that productivity gains have already been gleaned from technological advances and improvements in education.

So, does it matter? Yes, because our living standards are going to fall even further if we don’t improve our productivity levels so we can compete more effectively. Imagine increasing your living standards through being more productive!

It strikes me that the upshot of all these clever analyses is that:

Employers, generally, remain wary of the levels of demand for goods and services;
Survival appears to be more important than investing for the future and returns that may never materialise;
Confidence levels are low;
The effort appears to be going into selling and propping up demand;
Many firms have yet to adapt to the “new” realities of the world post 2008;
Playing it safe is more comfortable than pushing the boundaries on what is possible.
My temptation here is to find someone to blame but I’m going to avoid that because it offers little hope for being able to bring about improvements. Instead, I’m going to ask myself what I can do personally in an attempt to try to take some responsibility. As with giving to charity, if we all do a little that will add up to big changes in productivity levels.

The questions I’m asking myself include the following.

As a management consultant, should I be encouraging my clients to take more calculated risks so that they improve productivity? Should I be linking all of what I do to productivity (the first management consultants were, after all, focused on this issue). How can I help my clients reduce the risks of investment and innovation? How can I help build confidence in a more productive future with higher standards of living for all. What investments could I personally consider making in order to improve my own productivity? Indeed, why do I not invest more? Is it a question of selling more of the same or, by innovating, promoting new goods and services? Am I being just as risk averse and cautious as everyone else and does that add up to low productivity?

What does low productivity mean for you? What can you contribute to do your bit for the national economy? What’s holding you back from investing in the future? We can all sit back and wait for others to act or we can take some personal responsibility and try to make a difference.

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