PRODUCTIVITY: OPINION APRIL 2020
THE FRENCH CONNECTION
In response to MM’s February cover story exploring the UK’s productivity
deficit, Terry Scuoler, chairman of the Institute of Export & International Trade,
argues that statistics around the topic should be taken with a pinch of salt
BY TERRY SCUOLER, CHAIRMAN, INSTITUTE OF EXPORT & INTERNATIONAL TRADE
Editor’s note: this article was written before the
ongoing coronavirus outbreak. Britain’s poor productivity continues to
disappoint and puzzle in equal measure,
with the often-stated claim that the
French do in four days what we in the UK
do in five an affront to national esteem.
The claim is all the more puzzling
given that the French lose, on average, 3.5 million
man days per year to industrial unrest (a figure
widely believed to be understated) compared
to 270,000 in the UK, and have a significantly
greater number of public sector employees whose
productivity is generally regarded as lower than
those in the private sector.
With ongoing pension reform strikes
by French workers now lasting
almost four months (the longest
since 1968), and bizarre restrictive
practices such as employees in
companies with over 50 employees
having the ‘right to disconnect’ and not
communicate outside of contractual work
hours, the statistic surely defies credulity.
Denial, however, of the evidence from the
numerous studies and reports, including our own
independent Office of National Statistics (ONS)
would be short-sighted. There is simply too
much evidence supporting the conclusion that,
in terms of single factor output per hour worked,
we as a nation remain some 20-25% behind our
closest European rivals and 30% behind the US.
If anything, those same reports show that the UK
continues to fall further behind.
26
The February issue
of MM explored
how to get the
UK out of its
productivity rut
With a decrease of 0.2%
in the year to the end of
September 2019 and weak
growth of 2% since 2008, a
rate we used to
achieve every
year, we
appear to
have suffered
a lost decade.
It is all
the more
puzzling when one
considers the strong
productivity growth our
nation experienced during
the two decades in the run
up to the financial crisis.
Interestingly those sectors
whose productivity grew most
strongly over that period such
as manufacturing, financial
services and distributive trades
led the drop off during the past
decade and accounted for 70%
of the reduction in growth.
Why this is important
The Nobel Prize-winning
economist Paul Krugman
once wrote that “productivity
isn’t everything, but in the
long term it is almost
everything. A country’s ability
to improve its standard of
living over time depends
almost entirely on its ability to
raise its output per worker.”
He might also have added,
“and to increase wages.”
With over three million jobs
created since the financial
crisis and – pre the ongoing
Covid-19 crisis – employment
at its highest level since 1971,
there must be a suspicion
that many of the jobs created
are less productive than
those in previous decades.
More recently, other possible
explanations may include the
marked slowdown in private
sector investment due to Brexit
uncertainty and the resultant
tendency of companies to
recruit labour at the expense
of investing in productivity
improving capital equipment
and processes.
Another possible factor,
and one unique to the UK, is
the issue of scale. While it’s
heartwarming to note the
record levels of employment,
the UK’s five million selfemployed
workers, and indeed
our 5.9 million small businesses
tend to be less productive than
their corporate counterparts.
It is also harder to measure the
output of the self-employed and
www.manufacturingmanagement.co.uk
phonlamaiphoto /stock.adobe.com
/www.manufacturingmanagement.co.uk
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