BQ Newsletter
As I see it

Productivity pause

Tuesday 17 April 2012 9:00

Andrew Mernin

Are we becoming a nation of under-achievers? BQ looks at the evidence and reasons behind the UK workforce’s poor performance.

The rise of cloud computing, remote working and video-conferencing has come at a cost, according to the latest research.

Despite being home to one of the world’s most prolific car plants (Nissan in Wearside) and working more hours with fewer holidays than many European states, the UK’s productivity prowess is waning.

Undoubtedly there is the apathy factor. Pay freezes and a depressed job market have left many business leaders stuck and poorly motivated in roles not of their liking.

But there is also the impact of the fading status of the HQ. Workforces at many of the UK’s biggest employers are becoming increasingly dispersed – loaded with the latest mobile technology and left to their own devices.

Last month the Office of National Statistics referred to the ‘productivity pause’.

Its major report, International Comparisons of Productivity, showed the UK’s economic output per hour to be 11% lower than the average among other G7 nations.

Perhaps more worryingly, on a per hour worked basis, the productivity gap between the UK and the US at the sample date (2010) was at its widest since 1995.

Britain was the only nation to experience a fall in average hours worked between 2009 and 2010 and UK GDP per worker was lower than that of Italy and France.

Siemens Enterprise Communications has a theory on why our productivity is failing to keep up with other countries that are in just the same financial mess as we find ourselves in.

The company has conducted its own study of 1000 businesses around the world, including 200 in the UK in a bid to get to the root of the problems associated with the changing structure of businesses caused, in part, by technology.

“The results highlight the dramatic rise in devolved business operations over the last five years but also raise the question of whether greater productivity is resulting from this trend,” says Chris Hummel, CMO of the technology business.

“Only 15% of personnel actually go onto networks at a traditional headquarters - regional offices and mobile workers are now the effective drivers of business activity.”

Among the headline findings of the State of Enterprise Communications 2012 report was the suggestion that the bulk of a company’s communications are now residing within branch offices and mobile phones (76%).

UK companies have responded to this with productivity tools such as unified communications being considered by 86% of the UK’s enterprises, and 50% already implemented unified communications.

Despite this, productivity remains low, which business leaders consider to be a staffing issue – 49% of respondents felt that their staff simply do not have the correct communications skills to take advantage of the tools available to them.

Hummel says: “The research shows that whilst mobile and flexible working policies have now come of age, those who invest into policies and training that makes the most of these communications innovations will have a definite advantage over their less flexible competitors and will achieve more profitable operations over time.”

Skeptics may argue that the study has an ulterior motive to boost technology and training sales but at least the fierce defenders of our bank holidays have a scapegoat when the productivity question is raised.

The North South divide

While the UK’s productivity may be struggling to match that of some of our export partners, within England there is also a discrepancy between the north and south of England.

A report this week claimed that the UK economy would be £40bn better off if the productivity gap between the north of England and the south could be halved.

Nearly a third of England's working-age population lives in the north, but the value added to the economy by each northerner is £5,549 less than people living elsewhere.

The thinktank IPPR North says the government must ensure that the labour and creative abilities of people in the north are not wasted by overly focusing energies on growth in the saturated markets in the south-east.

A commission established by IPPR North notes that if the north of England were a European state it would be the ninth largest economy in the EU, ahead of Sweden, Denmark and Belgium, and that its potential to solve the UK's growth problem has already been seen in recent years.

Geoff Muirhead, chairman of the NEFC, says: "The north-south divide has existed for too long and it's having a negative effect on the national economy, which is desperate for growth.

“We can unlock potential for vital growth in the north if government creates a more level playing field. The north doesn't need more handouts but a long-term economic strategy which recognises the need for more local approaches to skills, innovation and infrastructure."