The United Kingdom's Productivity Gap

Despite low unemployment, the United Kingdom is currently faced with extremely low levels of productivity. As a country, the U.K. produces 30% less per hour than its counterparts in France and Germany while working on average more hours. The problem is deep-seeded and dates back to almost 1991. And although productivity was not high on the agenda during election season, Chancellor George Osbourne has stated that addressing the root causes is now a priority for Parliament.

It’s simple: the more productive the U.K. is, the more money can be earned both by individuals and collectively as a country. When asked why British labor is so unproductive, Osbourne replied “Frankly, nobody knows the answer.” However, economists have been able to identify a few key issues that may contribute to lower productivity. These economic experts believe that the decline in productivity can be attributed to a lack of investment, poor management, and inadequate education and training for workers.

In regards to investment, companies are not spending enough on the latest technology or on research and development. In Germany, for example, there are 1,034 research and development staff members per every 100,000 people. Conversely, there are only 883 similar workers in the United Kingdom. The low levels of investment also lead to poor infrastructure throughout the country. Specifically, the overly congested roads and crowded railways make commuting unpleasant for workers. In addition, moving goods around the country has become more expensive as a result.

Companies in the United Kingdom are also not well-managed, and workers are not as skilled as may be needed to complete certain tasks. Family-owned businesses appear to be the most poorly managed, and seem to overshadow the innovative British companies working to do business internationally. The lack of strong leaders and managers can often lead to the poor training of workers within a company, however, the issue of skills shortages can impact the company’s ability to function as well. The proportion of adults who lack basic literacy and numeracy skills remains a prevalent issue in the U.K., and the lack of these skills can cause managerial incompetence in the future.

The problem in the United Kingdom is cyclical and multi-faceted, and will require the attention of both government leaders and managers within companies. Nationwide productivity directly impacts the real wages of workers, and can also decrease the standard of living. What are some ways you think the U.K. can help to increase productivity?