Bolder strategy needed to boost productivity and economic growth

The Government’s plan to transform the UK into a science and technology superpower will fail to boost living standards unless it’s linked to a broader industrial strategy aimed at raising productivity across all sectors of the economy. This is the central conclusion of a new CIPD discussion paper, An industrial strategy for the everyday economy, which says a bolder vision for economic growth, looking across all sectors and areas of the economy, is needed considering the multiple challenges facing the UK.

These challenges set out in the paper include skills and labour shortages, stalled productivity and real wage growth and endemically weak business investment in skills and technology. In response, the CIPD is calling for the development of a comprehensive industrial strategy that supports and encourages more firms across all sectors to invest in the technology, skills development and management capability needed to improve job quality and raise productivity.

The paper argues that the Government’s primary focus on boosting investment in research and development (R&D) and high-tech and green growth sectors, though important to the overall economy in the long term, will only support relatively small sectors and limited numbers of firms. For example, it highlights that 75 percent of private R&D spend in the UK takes place in just 400 firms and that of the three million active UK firms, just 60,000 claim R&D tax credits.

It claims this narrow focus does not address the critical importance of improving productivity growth in ‘everyday economy’ sectors such as retail, hospitality, transport, logistics and social care, which account for at least 40 percent of employment*.

The paper also argues that a different approach is needed to improve performance in these sectors through boosting incremental, ‘bottom-up’ workplace innovation, which can enhance products and services and productivity across much broader swathes of the economy.

This approach to innovation is key to the successful adoption of new technologies and is supported by improvements to work organisation, skills development and changes to people management capability and practices. Broader adoption of these key people practices can also improve job quality, support people’s wellbeing and widen labour market participation to tackle skill and labour shortages.

The CIPD’s recommendations include:

• Developing a bold, broad industrial strategy that integrates interdependent areas of policy such as skills, job quality, workplace innovation, business support, digital adoption and green transition.
• Learning from best practice approaches toward business support and improvement, from overseas and from small-scale interventions already run in the UK.
• Building on the range of pilots to test and scale-up effective approaches to improving management capability and business performance at local and sectoral levels. For example, building on insights from CIPD’s HR support pilots for small firms, Be the Business and Help to Grow Management.
• Developing coherent industry level and local employer partnerships, to boost adoption of technology and best practice people management and development practices across ‘everyday economy’ sectors and all regions.
• Transforming labour market enforcement with a much stronger focus on supporting employer compliance and raising employment standards overall, given the link between job quality and productivity.