Commenting on new statistics which showed the UK had the second-lowest productivity level in the G7, James Sproule, Chief Economist at the Institute of Directors, said:
“It is not surprising to see that the UK continues to lag our G7 competitors in terms of productivity. There is, however, a significant silver lining to the structure of our economy. Britain has struck a balance between an open, competitive economy and a sensible level of employment regulation which should be the envy of Europe. We have high employment, strong wage growth and a level of flexibility which encourages entrepreneurship and innovation.
“The United States, which has embraced agile markets, shows the potential of free and open economies to boost productivity. While we would not – and could not – replicate every element of the US economy, there are lessons Britain can learn. A closer collaboration between universities, businesses and investors, and a warmer embrace of equity finance for instance, will help create the knowledge-intensive, risk-taking and entrepreneurial businesses which will drive productivity gains.
“In the era of major technological change, we should arguably be focusing more on ‘agility’ than ‘productivity’. The firms which are most productive are often the biggest, with deep specialisation in niche areas that have considerable economies of scale. But the economy of the future looks set to be dominated not by big companies, but by fast, agile, quick-moving and reactive ones. The firms that can respond to consumer demands most effectively and bring new products and services to market will reap the rewards.”
The IoD will be releasing a new report into the UK’s “productivity puzzle” at this year’s IoD Annual Convention, which takes place on 6 October