Productivity is all
Tony Ward is chief executive of Clayton Euro Risk
Mark Carney, governor of the Bank of England, has described productivity as ‘the ultimate determinant of people’s incomes and with the capacity of our economy to support health, wealth and happiness’.
I guess if we are to take these words as read then it is the foundation on which the well being of the country rest.
I was therefore disappointed to read this week that the Office of National Statistics (ONS) reported that British workers were a third less productive than their German and French counterparts last year.
As well as losing ground to our European friends, we were also some way behind the United States and Canada.
The ONS suggests that Britain produced some 20% less per hour than other members of the G7 group of advanced economies – the worst result since records began.
In fact only Japan produced less.
Joe Grice, chief economist at the ONS, said: “Since the economic downturn, productivity growth has slowed in most developed economies but by more in the UK than the average.”
Grim news, then.
Well maybe, but I‘m starting to see signs of improvement.
I’m pleased to note that the government is taking the productivity challenge seriously.
In July, the chancellor George Osborne announced a ‘productivity plan’ involving planning reforms, devolution, low taxes and apprentices.
All very welcome and hopefully this will have positive effects.
Also there are clear signs that a recovery in output is underway with wages increasing at their fastest pace in six years.
Productivity seems to be gaining momentum.
Andrew Goodwin, UK economist at Oxford Economics, certainly thinks so.
“Hours worked fell by 0.4% in the three months to July while GDP probably grew by around 0.7% over that period, which implies a very strong pick-up in productivity at rates which are some way above the long-run average,” he said.
And even the Bank of England seems more optimistic than of late, suggesting that productivity growth picked up to 1.5% in the year to June.
Back in June I mentioned in a blog that productivity was the watch word of the day.
Well it remains very much so.
While things seem to be improving we should learn from those sectors in the economy that are performing well and try to emulate their success.
Hopefully those ONS figures will serve as a wake-up call.