Tuesday, 16 June 2015

The Productivity Puzzle

"The headline feature in the June edition of "Business Network magazine* is the "Productivity Puzzle".

The essential thrust of the article is that the improvement of productivity in the UK over time and indeed within the East Midlands has lagged behind our international counterparts, particularly most of the G7 countries. And this clearly impacts on our ability to improve our GDP and hence enhance the living conditions of our citizens.

A number of commentators are cited who offer a variety of reasons for this tardy performance. The first "most obvious" reason is declared by Patrick Keen of Enscite is  the need to improve the skills of the workforce and "widen the talent pool of young people coming into engineering." I can readily comprehend this and indeed Landmark Planning's current most important and largest project, the Skills Hub proposal for Nottingham City Council, New and Central Colleges on land to the east of the Broadmarsh Centre in the City Centre, is trying to address this issue in Nottinghamshire.

Mark Carney, Governor of the Bank of England considers up-skillling workers is key. The recent rapid growth in the size of the workforce may have helped subdue wages growth with a disproportionate number of low skilled jobs . And this is a cyclical phenomenon that weighs on productivity. People new to jobs "are not as productive as they are with time." Again I can readily relate to this from personal experience – with the labour force growth greater in the UK than elsewhere.

George Cowcher, East Midlands Chamber of Commerce Chief Executive further points to weak business investment in recent years that has had an impact on productivity. Again a plausible partial explanation, as I know we (at Landmark Planning) have certainly been very wary of significant such investment for a number of years now, albeit we have changed our viewpoint in the last 9 months.

But then the article concentrates on the devolution debate. It argues that much greater meaningful devolution to "City Regions" could bring greater efficiencies, more accountability and better results. And certainly again you can see the possibilities of for example being able to focus investment in key sectors identified locally (for example food manufacture in Leicestershire) or direct investment and operations in areas such as public transport. I do worry that this might lead to  larger bureaucracies debating and then controlling possible expenditure. Any intervention needs to be as light touch as possible. On this issue Landmark Planning are helping organise a Royal Town Planning Institute debate with key regional opinion formers on this very topic on 4th December in Leicester, to which all are welcome. (further details to be announced).

So a wide range of variables to improve our economic performance. To this I would add the following:

No mention of how we seem to have voluminous rules and regulations, which hold back certainly small business owners who have been a major source of UK growth for many years. Here I don’t just mean European influences such as public procurement rules, but national and indeed those imposed by large firms on small when tendering for contracts. Pre tendering requirements seem to mushroom like topsy, but in my opinion do not properly assess the capability to actually do the job. As a small business owner we cannot carry all the specific expertises, but we do meet all our legal requirements from pensions to health and safety. That should be taken as a given until proved otherwise. We don’t want a nanny state or even the big boys tell the small boys how to do it. Going through all the hoops to satisfy the different administration formats wastes much non programmed time which should be the most creative of the key personnel in any firm. And that has to be a drag on productivity.

However, what I would really like to see is some proper scientific analysis of the impact of all the different influences on productivity. The relative importance of the different factors listed above and indeed others. It would be a hard job, but could well be worth the analysis. At the moment we have lots of opinions, but no real comparative substance to the arguments – it is all just a matter of opinion.

And what is yours?

*Business Network is the monthly magazine of the East Midlands Chamber of Commerce; the second largest Chamber of Commerce in the country.