Posted: 05 Dec. 2018 7 min. read

Scotland’s Productivity Challenge

Productivity and jobs are vital to the wealth and welfare of Scotland.  If we could solve Scotland’s productivity challenge, this would provide a unique opportunity to create a more prosperous society and improve living standards.

In our latest Power Up: UK-Wide Growth report we’ve taken the overall topic of productivity to help identify where we can maximise on opportunities by learning from the past and then combining this with the very real experiences and views of the present. This unique approach takes 36 years of ONS employment data and 19 years of productivity data, therefore providing an opportunity to identify and discuss trends that have not been visible before. 

Acknowledging that data will never give us the full story, we have also interviewed over 50 people from across the UK - all of which have a stake in and a unique perspective on, the productivity “puzzle”.

So what did we find out about Scotland?

We found that Scotland’s businesses need to collaborate further with educators and policymakers to develop the vital skills required to harness productivity for regional growth.

We also found that while Scotland has outperformed the UK average in productivity growth over the last 10 years, closing a previous gap, the growth rate has declined across the UK as a whole since the financial crash. Slowing productivity across certain sectors and lower levels of investment in high productivity sectors are contributing factors to this decline.  However, Scotland, like the rest of the UK, has rapidly created jobs over the last eight years, with unemployment down from 8.8% in 2010 to 3.8% in the period July to September this year.

The report shows that Scotland’s output per head was higher than the average of all other UK regions and nations, except for London and the South East. However, low growth in Scotland remains a concern.

It also shows there are clear signs that Scotland’s businesses, educators and policymakers must collaborate to shape the skills that will be essential for driving productivity and economic growth. In addition, businesses will need to increase investment in upskilling their talent pools in the face of advancing technology, AI and robotic capabilities. Underpinning this is the inherent need for leading connectivity infrastructures and associated investment.

Our research has also highlighted that Scotland needs more businesses of scale that are competitively positioned across international markets. This requires greater vision from Scotland’s private companies, as well as support in the development of their leadership skills and confidence to enter and succeed in export markets.

So with huge change ahead, it will be interesting to see how Scotland responds to the productivity challenge, and the recommendations made in our report.

Business is and continues to invest. Many businesses like us are undertaking educative programmes to try and address the current and future skills gap, and creating new hubs and delivery centres outside of London to attract talent to the regions and create new jobs to fuel growth.

The only way to be effective in these pursuits is if we find ways to improve how we collectively collaborate with central and local government, educators and each other.  Place-based strategies will be instrumental and we need a clear focus on skills and infrastructure going forward, whether that be in the built environment or digital.

Our report does not have the single definitive answer to productivity but it should, through the contributions and emerging themes, inform and prompt debate and discussion. I look forward to being part of those discussions and importantly, seeing how we can then translate these into action.

Key contact:

Stephen Williams

Stephen Williams

Partner

Stephen’s experience over the past 27 years has always been exclusively with retail financial services clients. Stephen is a member of the Board of Deloitte, and is the Chairman of Deloitte’s own Audit & Risk Committee. Previously Stephen worked on secondment for the EBRD in Eastern Europe, and spent 6 years in South Africa where he worked with local financial institutions. His present external audit clients include a number of regulated banks and other retail financial services businesses; including a number with an international presence. He also leads a number of propositions in the Challenger bank space, and leads a number of assurance and advisory projects in this space; including internal audit arrangements, regulatory advisory work, and work on assessing corporate governance and risk management frameworks. Recent other projects in which Stephen has been involved include: leading a HM Treasury CCA investigation resultant from a significant redress programme,  leading the reporting accountant work on the IPO of a now listed bank; leading the due diligence on behalf of a number of investors into a failing Building Society, and  Undertaking a number of S166 reviews on behalf of the regulator in relation to corporate governance and risk management at Challenger Banks.