As we navigate our future, the fact that we lag some way behind global competitors in productivity – including countries such as the United States, Germany and France – highlights the need for much greater collaboration between central and local government leaders and business. Industrial strategy must unlock economic growth across the entirety of the UK.
The trade-off between productivity and employment growth
The UK has succeeded in creating jobs. For the sectors we analysed, the UK created a net total of nearly seven million (6,936,000) jobs between 1982 and 2017. Unemployment in July-September 2018 was 4.1%, down from 8.4% in 2011.
There is often a trade-off between productivity and employment growth. For example, productivity in manufacturing has risen strongly since 1997 while witnessing a sharp decline in employment. But experience in sectors such as ICT and the professional, scientific and technical sector show that it is possible to increase employment and productivity in tandem.
Unlocking regional productivity
The most productive area of the UK remains almost three times more productive than the least. As you’d expect, the data shows gains and losses. Our countries and regions are diverse, and combine heritage and new growth in their own way. We looked at the best regional performer for each sector. If this performance was replicated across the UK as a whole, this would be worth an additional £263bn to the economy, or nearly £10,000 for every UK household.
After speaking to over 50 business leaders, the overwhelming sentiment was the need for investment, particularly in infrastructure and skills. When asked ‘What would be the single most cost‑effective solution to help unlock further growth in your region?’ improving digital infrastructure is a frequent response. By the same token, digital infrastructure, if done well, is cited as one of the prospects that most excite people about the future.
Interviewees stress the need not only for adequate digital infrastructure, but also for equipping people with skills to utilise it. Regions have seen remarkable success in generating work, creating seven million jobs since 1982 and taking employment to record levels. However it is imperative the UK anticipates what skills it will need in 10-15 years.
The businesses that will be most successful in driving productivity will be those that optimise the benefits of new technology and AI, whilst enabling the progressive up-skilling and deployment of their talent in higher value activities. Talent will be attracted to (and retained by) those businesses and organisations that provide a structured curriculum of personal and skills development.
What can I do now?
There was an overwhelming sense of regional pride and commitment that comes through from the interviewees. Regional businesses need a devolution framework and for deals to work effectively. We need to plan and execute place-based strategies and work with recently appointed metro mayors in our city regions, but making sure that other areas do not lose out unfairly in spending and investment allocations.
- Business leaders, educators, local authorities and Government must work together to help create the climate for growth and to calibrate an ambitious and flexible place-based strategy.
- Opportunities need to be provided to allow workers to learn new skills.
- Ensure that devolution deals work effectively for all nations and regions.