A Mercedes-Benz factory in Rastatt. German workers produce the same in four days as UK workers do in five [Image: Kai Pfaffenbach/Reuters].

A Mercedes-Benz factory in Rastatt. German workers produce the same in four days as UK workers do in five [Image: Kai Pfaffenbach/Reuters].

Apparently the decision of successive neoliberal governments to support a low-paying service industry while destroying manufacturing has harmed productivity.

And the reluctance of domestic businesses to spend their money is also holding us back.

Part of Ms Riley’s comment also suggested that legal changes allowing firms to rid themselves of employees would also increase productivity – but This Writer has deep doubts about the claim.

It might improve profitability – but that is not the same as productivity.

But this raises another question:

Why is Philip Hammond concerned about productivity anyway?

He raised the issue in his Autumn Statement.

But it seems he may have meant profitability instead.

If so, he has sent the whole country off on a wild-goose chase.

Rebecca Riley, a research fellow at the National Institute of Economic and Social Research, said declines in banking and the oil industry partly explained the UK’s low productivity rate, but there were also a host of other factors.

Studies have looked at whether the near collapse of the banks restricted the supply of credit to companies and prevented them making productivity-enhancing investments. Riley said this would have had some impact.

The rapid expansion of mainly low-level service jobs that carry low levels of pay is another reason. In France and Germany, the coffee shop and online delivery culture is still in its infancy by comparison with the UK. These are businesses that provide a valued but unsophisticated service with limited room for productivity improvements.

It means the UK has lower unemployment and a bigger workforce, with fewer people economically inactive than France – but lower productivity and lower pay.

Bill Martin, a former City economist who is now at Cambridge University’s Judge business school, has argued that the UK’s poor productivity is “more plausibly interpreted as a symptom of a largely demand-constrained, cheaper-labour economy”.

He is not alone in saying that companies would invest in new equipment and be more productive if only there was higher demand for British goods and services from its domestic businesses, consumers and the international community.

The UK has seen a much bigger fall in trade as a proportion of GDP than France or Germany in the past eight years, forcing it to rely increasingly on its own economy to drive demand – a challenge that consumers have met, but businesses have refused to join.

The OBR said a planned Brexit in 2019 would further damage Britain’s export sector and push down trade as a proportion of GDP. The fear must be that this will further discourage investment and delay again the moment productivity stages a recovery.

Source: Why is UK’s productivity still behind that of other major economies? | Business | The Guardian

Join the Vox Political Facebook page.

If you have appreciated this article, don’t forget to share it using the buttons at the bottom of this page. Politics is about everybody – so let’s try to get everybody involved!

Vox Political needs your help!
If you want to support this site
(
but don’t want to give your money to advertisers)
you can make a one-off donation here:

Donate Button with Credit Cards

Buy Vox Political books so we can continue
fighting for the facts.


The Livingstone Presumption is now available
in either print or eBook format here:

HWG PrintHWG eBook

Health Warning: Government! is now available
in either print or eBook format here:

HWG PrintHWG eBook

The first collection, Strong Words and Hard Times,
is still available in either print or eBook format here:

SWAHTprint SWAHTeBook