The UK is experiencing an ongoing ‘productivity problem’. Despite ONS data suggesting a very modest uptick in productivity growth over the past two quarters, we have a huge amount still to do to address the significant and widening gap between UK productivity and that of our major economic competitors.

We have seen a raft of Government policies in recent years that seek to address the ‘productivity problem’, recognising the imperative of raising productivity in increasing our prosperity, driving up real wages and improving living standards

But we need new thinking about what can be done to make more businesses competitive and to tackle the ‘long tail’ of businesses that are under-performing; the subject of the BEIS-HMT led Review announced in the Industrial Strategy.

What factors contribute to the productivity gap? And what additional interventions might support productivity-enhancing practices amongst Britain’s businesses?

These are the key questions the Work Foundation is grappling with in a new project for the Productivity Leadership Group Be the Business. The work is looking specifically at productivity amongst small and medium-sized manufacturers: a sector that is growing strongly, generally outperforms the wider economy in terms of productivity, but which recent analysis by the Bank of England suggests is the second largest contributor to the productivity slowdown.

Our work to date points to a multitude of culprits, from a lack of investment (in capital, technology and skills), slow innovation diffusion, weak management and working practices, and a failure to exploit high value product markets and export potential. It is unlikely therefore that a single course of action will prove successful: there is ‘no silver bullet’ for tackling the productivity problem.

What is clear, however, is that there is a vital role that businesses can play directly themselves. The next stages of the project will explore how we can change the hearts and minds of Britain’s businesses; to build awareness and commitment to addressing these issues and deliver sustained improvements in productivity. We will report back in the Summer.

About the author

Heather Carey

Deputy Director of the Work Foundation