The UK’s record on productivity shows no sign of improving and, indeed, is set to get worse according to a report by the Conference Board, an American research group.
GDP per hour is forecast to rise by only 0.2% in 2019, which is below the US (+1.3%), France (+1.1%) and Germany (+0.5%). In fact, it is the biggest drop in labour productivity growth since the financial crisis in 2008.
All pretty dismal reading.
Brexit, of course, will be playing its part – or at least provides a convenient peg to hang the blame on – and is likely to intensify the problem if the UK economy closes its doors, intentionally or otherwise, to overseas investment and innovation in the aftermath of any deal.
Employment levels are often the trade-off for high productivity, as technology innovations and other process efficiencies reduce the need for people to perform roles. The UK is enjoying record employment levels. With only 3.9% of the working population out of work, the unemployment rate is at its lowest level since 1975.
These strong levels of employment are creating opportunities for women and the over 50’s as well as young people entering the labour market for the first time. There must be some cause for celebration in that. No?
As an economy, it seems we have a choice to make. Are we willing to accept relatively poor levels of productivity if most of the population is in work? This is a social as well as an economic dilemma.
When we boil the question down from macro-economics to the impact on individual small businesses where cash is king, productivity has to be the answer. High levels of productivity mean higher outputs, lower costs and greater profits which can be reinvested into the business – possibly creating more jobs - or shared in the form of real wage increases.
Yes, this can mean some up-front investment – overcoming the thought that it's easier to hire a couple of extra people than make a big capital commitment – but everybody is a winner in the end.
Here at Productivity Finance, as well as being passionate about helping our clients source the right sort of business finance to boost investment in their businesses, we are equally committed to sign-posting our clients to information and advice that will help them improve their outputs per head. This could be in the form of investments in technology, but could equally be in training, management skills or process improvements.
Please speak to us for more information.