Firstly, it may be helpful to just define what we mean.
Productivity is how efficient a business is in getting results, profitability is the benefit of that result.
UK productivity has been in decline since the 1960’s. However, the rate of decline accelerated during the mid 2000’s. This is mostly due to the financial crisis. However, the rate of decline is significantly more than in comparable western economies like France, Germany, and the Netherlands.
It is fair to say that Germanys industrial base is much larger than the UK and this has helped prop up its economy. That isn’t the same for France and others, the UK simply lags behind and output per worker continues to be significantly lower.
Historically low investment in people and education has been a factor that is muted as having a significant impact. One only has to look at the UKs history and see how even at the start of the industrial revolution, entrepreneurs racked in vast profits and did very little to improve workers lives. The same can be seen in the boardrooms of today, where profits are far more valuable to shareholders than the productivity to achieve them.
Interestingly, if we look at the digital age, the picture may well be changing. UK investment in digital start-ups is significantly higher than the UKs European counterparts, this has fostered a new generation of entrepreneurs, bright eyed bushy tailed people bringing new and exciting ideas to market.
This investment is cross discipline, so we are seeing great ideas in fintech, medtech, greentech and all the other techs!
In 2020 the digital sector contributed £142.3bn to the UK economy, that equates to 7.5% of our GVA up from 7% in 2019.
This investment and the gains that have been made are a fantastic step forward. But, and I am afraid there is a big but. Without investment in people the gains from the digital age will be yet again short term.
As the clouds of recession loom and political instability on both a national and international level continues. The need for investment in people to take advantage of the opportunities that the new economy provides is even greater than before.
It is intrinsic on all of us who are involved in nurturing this new generation, to ensure that they do not make the same historical mistakes. That they make the most of their opportunities and invest in themselves and their workforce which has the potential to not just turn a quick profit but more fundamentally transform an entire economy.