July 14, 2023
The decline in UK productivity since the Great Recession of 2008/2009 has been a matter of concern for business leaders, policymakers, and economists alike. Despite hopes that the pandemic would act as a catalyst for transformation and boost productivity, recent figures from the Office for National Statistics (ONS) show that the UK still lags behind several other G7 economies.
Most industries have large inefficiencies which represent a major opportunity and the potential for productivity gains is enormous. The direct cost of avoidable error in the construction industry, for example, is around 5 percent of project value according to international studies highlighted by construction industry experts GIRI (Get It Right Initiative). Plus, GIRI recently reported that when ‘unrecorded process waste, latent defects and indirect costs are included, estimates of the total cost is closer to £10-25 billion per annum across the sector.’ Similarly in the oil and gas sector, it’s circa 15 percent of project value. This is just the tip of the iceberg, and the challenge for many senior leadership teams is understanding and knowing how and what to do to improve productivity.
How can leaders know what their teams and contractors are doing?
Best practices in multiple industries are built over many years. To be successful these need to be actively deployed, managed, and integrated into day-to-day operations. However, it is not unusual within organisations to see guidelines and processes left collecting dust on bookshelves or ignored on servers. They provide false assurance that the organisation is doing what it needs to for its stakeholders. In addition, operational managers are often faced with variations of international, national, and regional standards.
So how do we address this? How can operational leaders know what their teams and contractors are doing? Splitting best practices down by role and placing the measurable metrics in the hands of the workforce enables active reminders, ongoing support and tracking of their use, plus improvement of the content on a 24/7 basis. The impact of this is that false assurance becomes real assurance whilst changing the mindset and culture of the entire organisation.
Furthermore, organisations of all sizes rely heavily on contract supply chains. Contract supply chains enable growth and flexibility within a company along with many other benefits. When things run smoothly all is good, yet problems can and do arise. The challenge for business leaders is that all too frequently problems only become apparent when the product or service is delivered, and this in turn causes major disruption, delays, and spiralling costs.
The good news is that thanks to advances and investment in digital transformation the solution is at hand, as technology such as Benchmax, Service Now, and Ideagen can help to deliver efficiencies. All suppliers have best practices which can be distributed by role to enable active reminders, ongoing support, plus tracking of use and improvement of content daily. Importantly, this technology once applied enables organisations to see the active deployment of best practices which improves productivity.
The UK’s investment in technology and tech infrastructure lags behind countries such as the United States, Denmark, and South Korea
Digital transformation should also be embraced to unlock productivity gains. The pandemic has highlighted the importance of digital technologies for business resilience and efficiency. Embracing digitalisation across sectors can automate routine tasks, enhance communication and collaboration, and optimise processes. The government can support digital transformation through initiatives such as providing incentives for businesses to adopt innovative technologies, improving digital infrastructure, and promoting digital skills training. Furthermore, fostering a digital ecosystem that encourages research and development in emerging technologies can position the UK at the forefront of innovation and productivity growth.
Today, the UK’s investment in technology and tech infrastructure lags behind countries such as the United States, Denmark, and South Korea. Investment in infrastructure is crucial for enhancing and improving productivity. The UK has historically suffered from underinvestment in infrastructure, including transportation networks, digital connectivity, and research and development facilities. A significant increase in public and private investment in these areas can lead to improved efficiency, reduced transportation costs, and enhanced connectivity, enabling businesses to operate more effectively.
It will also keep the UK in line with other competing countries. Additionally, investment in research and development can drive innovation and technological advancements, further boosting productivity. The USA has been wise to invest heavily in technology and now leads the world whilst replacing a considerable proportion of its manufacturing base where lower-cost nations have picked up the baton.
Improving regional productivity disparities is also crucial. Productivity levels vary significantly across different regions of the UK, with London and the Southeast not only outperforming other areas but the difference is increasing year on year according to the Office for National Statistics from (1998 to 2018). Investing in regional infrastructure, promoting collaboration between businesses and educational institutions, and supporting regional innovation hubs can help reduce these disparities. By ensuring that all regions have the necessary resources and opportunities to thrive, the UK can unlock untapped potential and drive overall productivity growth.
Encouraging businesses to take risks, experiment with fresh ideas, and learn from failures can lead to breakthrough innovations and productivity gains
Finally, fostering a culture of innovation and experimentation is essential for productivity revival. Encouraging businesses to take risks, experiment with fresh ideas, and learn from failures can lead to breakthrough innovations and productivity gains. The government can create an innovation-friendly environment by providing improved tax incentives for research and development, facilitating knowledge transfer between academia and industry, and promoting collaboration and knowledge-sharing among businesses.
Reviving UK productivity requires a comprehensive and coordinated approach that addresses multiple aspects of the economy. By investing in infrastructure, addressing the skills gap, creating a multi-skilled, sector-transferable workforce by sharing core skill data, supporting entrepreneurship, embracing digital transformation, reducing regional investment disparities, and fostering a culture of innovation, the UK can set itself on a path towards sustained productivity growth. Policymakers, businesses, and society must recognise the importance of productivity and collaborate to implement the necessary reforms and initiatives to unlock the country’s full economic potential.
We need also to enthuse the investment community with the growth potential of technology in the UK. Companies such as Constellation Software of Canada, whose share price has quadrupled in recent years through the growth of their technology-based business internationally, is a notable example. It’s no surprise that over 65 percent of investment funds in UK technology originate from North America, as UK investors move slowly behind them in their understanding and enthusiasm for higher-end tech.
To move our industrial base from our past heavy industries and beyond the thinly protected finance sector (which has championed the nation in the near past), and into the bold future our young deserve a challenge. But it’s an exciting one in which we will change the way we function as a nation. Again. And again.