UK Productivity — what does it mean to you?

Productivity is one of those core aspects of running a business that many owners and managers instinctively focus on. One of the fundamental differences between a well run business and one that is not, is the productivity of the workforce and all of the capital assets that are engaged. Finding new ways to improve business productivity is a question that I and my colleagues are frequently asked by our clients.

Productivity has gained prominence recently in Government and economic circles as the missing ingredient following our emergence from the recession of 2007–2012. So much so that it is fast becoming a key aspect of debate now in political economic circles and is a driver in Government Economic and Tax policy.

The reason that it is now so hotly debated is that in UK productivity has nose dived in the past three or four years, and if it is not brought out of the dive it will have a serious impact upon our livelihoods and the prospects of re-election for this Government.

So what’s it all about

Put simply productivity is a measure of output per hour worked across the whole nation. The reason we have all enjoyed an improvement in our living standards over the past 50 years say, is that the value of goods and services produced per head of the population has grown. That is good news for those in work and also for Government, who like it because it leads to greater tax revenues, and the capability to spend more on Government services without borrowing.

Unfortunately since 2008/09 productivity has been only grown by 0.8% per annum compared to the historic trend of 2% growth per annum. Furthermore those who purport to know about these things seem to have been unable to understand why it has dropped so much. And without a consensus on the reason for the fall it is difficult for Government to be confident that it is able to fix the problem through a combination of policies and other stimuli.

Furthermore unless something is done to fix the problem then the gap in living standards between UK and better performing nations (US, Germany, France) will only widen. The UK will be seen once more as a poor performing nation with the adverse effect upon the value of Sterling, reduced Government debt credit ratings, higher interest rates, and a whole range of problems that will bring to bear down upon the Chancellor.

And what is being done about it?

As I referred to in a blog I wrote recently, the UK Government published a document in July 2015 called “Fixing the foundations: creating a more prosperous nation” which sets out 15 actions that it intends to take. These actions form the bedrock of policy towards investment, infrastructure, taxation, welfare, skills training, and devolution of power throughout the life of this Government.

Not surprisingly different members of the political and business establishment have reacted in differing ways towards this document. Is it all the fault of past Government policies? Is it a structural shift? Is it because businesses are not investing enough? Is it because we are a low pay economy now?

The White Bruce view

My colleagues and I at White Bruce take the view that the best way to approach such a macro problem is from a micro position.

Essentially I believe that a well managed business operating in a sector that is stable and is operating efficiently should bring rewards for everyone involve with it. Customers, suppliers, investors, managers and workers. And we mustn’t forget HMRC!

The parts that can be managed best are all the above with the exclusion of HMRC, but even that is not without some opportunities to be investigated.

As a Business Development consultant I aim to improve the value of every business I work with. That might be by improving the internal management systems, providing insights into profit margins, reducing costs, improving working structures and flows, finding finance for expansion and growth. All of these things bring opportunities and benefits to those involved with the business.

So if Government policy papers leave you cold or appear irrelevant to you as a business person, just consider what you would need to do in order to increase your sales without incurring any extra cost? Generating a sustainable improvement at the bottom line is something that we can all relate to.

If you want to talk about your business, and how you would want to improve its own productivity, please write to me. I would be very happy to hear from you.

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