The U.K. needs to urgently design its strategic approach and take concrete steps to develop world-beating productivity to drive economic growth and raise living standards, according to new research by The Chartered Institute of Management Accountants (CIMA), the world’s largest body of management accountants.
Since the 2008 financial crisis, the U.K. economy has failed to return to its pre-crash rate of growth, a phenomenon that economists call the “productivity puzzle”. The U.K.’s growth lags 15% behind its G7 peers the US and France. In addition, in its Tackling the U.K. Productivity Puzzle report, CIMA found that if the U.K. was a U.S. state, it would now be the poorest within the USA*, further highlighting the U.K.’s long-standing productivity gap and failure to grow when compared to other major economies.
The report, which outlines 35 recommendations to help improve productivity in the U.K., calls for the introduction of a national productivity strategy to replace the Government’s Plan for Growth to generate sustainable economic growth and drive real wage growth.
It also supports existing calls for the creation of a Productivity Commission in the U.K. that focuses on actions to tackle this systemic issue and go much further than the recently launched Productivity Institute. The U.K. Productivity Commission should be set up as an independent research and advisory body, similarly to the Bank of England or Office of Budget Responsibility, to make research on productivity more tangible for businesses and hold the Government accountable for delivering its productivity strategy.
Andrew Harding, FCMA, CGMA, Chief Executive – Management Accounting at The Chartered Institute of Management Accountants, said, “Improving the competitiveness of British business is key to future standards of living across the country and addressing the levelling up agenda. For over a decade it has been a puzzle and now with the headwinds of Brexit and the COVID pandemic, we need a strategic approach to business and productivity that grasps the opportunities of tackling environmental and social challenges, and invest in a Productivity Commission that not only analyses but also sets specific, measurable and attainable growth targets.”
According to a survey of finance professionals for the Tackling the U.K. Productivity Puzzle, the main barriers to improving productivity in U.K. businesses are down to a mismatch between skills and market need. Many businesses report that they are currently struggling to match available skills to those they need to improve their performance.
Harding added, “We must put a greater emphasis on investing in skills to help generate economic growth and tackle the long-term challenges this crisis has only exacerbated such as our low productivity, high dependency on lower-skilled workers, regional imbalance, and weak social mobility. The U.K. can’t afford to play the waiting game on this issue.”