The perennial productivity puzzle

OK, Boris Johnson didn’t actually do an awful lot towards the end of his tenure, but in just 45 days Liz Truss was appointed PM, announced a ‘mini budget’ that had all sorts of ramifications - and I don’t say that in a good way - and resigned, leaving the door to Number 10 open for the current incumbent and, in the views of many and probably more importantly, the financial markets, the more economically astute candidate, Rishie Sunak.

So, what does this mean for UK industry? Although we never got to the nitty gritty of the Truss plan for “growth, growth, growth" as she was gone, gone, gone before any of the details were revealed, the basic aim to improve productivity is a good one. But an aim without a sound plan of how to achieve the given aim is pretty much useless, and let’s face, it there didn’t seem to be any particular strategy apart from tax cuts funded by borrowing, which would hopefully trickle down to boost the wider economy.

Would this really have helped to boost productivity? Well, unless we can access a parallel universe where Truss is still PM it’s a tough call to make, particularly as productivity in the UK always proves to be such a tricky puzzle to solve. UK productivity has more or less flatlined since 2008, falling behind comparable economies. In theory, we know how to improve productivity – investment in the latest tech, embracing automation and skills training all have a role to play – but the pieces just never seem to fall into place. And maybe that’s the problem. We can’t expect things to ‘fall into place’, there needs to be a comprehensive strategy, it needs to be long-term, and it needs to be driven by the Government.

That's not to say that there aren't already some great things happening in the UK's industrial sector. The latest Make UK/Infor survey shows how Britain’s manufacturing sector is increasingly embracing the digital industrial revolution with aims to boost productivity, improve energy efficiency and overcome supply chain shocks caused by COVID and Brexit.

And, against a background of Sunak apparently planning deep spending cuts, Make UK is urging the Government to protect vital digital support programmes in the coming Spending Round. These include schemes such as Made Smarter and Help to Grow Digital which help SMEs in particular develop digital skills and practices. In addition, to unlock greater innovation and ideas, Make UK is also calling on the Government to accelerate further private investment in R&D by expanding the R&D tax credit to include capital equipment within qualifying expenditure.

Will the Government take heed? Watch this space...