Playing catch-up

UK
productivity has some way to go if we are to overtake France and Germany.
Quentin Reade investigates

The
UK’s lack of skills continues to have a negative impact on productivity,
according to a new report.

The
report, Catching up with the Continent, a study comparing productivity in
manufacturing across France, Germany and the UK, published today by the EEF
manufacturers’ organisation, shows the impact of that lower levels of skills in
the UK.

Based
on a survey of 600 senior manufacturing managers in the three countries,
carried out by NOP, the report also highlights the inadequate and poorly
structured funding of apprenticeships in the UK.

The
EEF has reiterated it’s call for the funding cap for modern apprenticeships to
be lifted in the forthcoming government spending review and for a continued
emphasis to be placed on raising the status of vocational education in the
reform of the education curriculum for 14-19-year-olds.

Commenting
on the survey, EEF director of education & skills, Ian Peters, said:

"The
level of UK skills remains behind that of our competitors and continues to be a
significant drag on our attempts to close the productivity gap with our
competitors. It is vital that the Government’s positive commitments on
increasing long-term resources for education and skills are safeguarded in the
forthcoming spending review and not sacrificed for short-term savings."

On
a positive note the survey suggests that UK firms are planning to more than
match their competitors in the amount they invest in training in the next 12
months.

Key
findings:


Only UK firms regard the skills available to them as having a negative impact
on trends in productivity. Medium-sized firms in the UK are the ones bucking
this trend


UK companies have recruited the lowest number of apprentices in the past two
years,  at 40 per cent, compared with 70
per cent in Germany and 60 per cent in France


The main reason for not recruiting apprentices was ‘no need’ in all three
countries. However, the UK had the largest number of companies stating this (68
per cent), compared with Germany (25 per cent) and France (40 per cent)


More UK companies plan to increase investment in training in the next 12
months, compared to France and Germany


UK firms see the quality of school leavers as a continued drawback in their
ability to attract the right people. In France and Germany this is not seen as
a problem

The
quality of Higher Education was seen as a positive factor in all three
countries, as was the need for graduates to have more work experience. In
addition, the survey showed that the ‘select group’ of companies in all three
countries that invested strongly across the board in new technology, skills and
innovation achieved substantially higher rates of growth in productivity and
profitability.

However,
the survey also showed that, in the UK, the difference in performance between
the ‘select group’ and the rest of the sample was smaller than in the other
three countries. This suggests that other factors, including the need to make
more effective use of modern working practices – such as lean manufacturing and
high-performance working – also need to be addressed if the UK is to succeed in
closing the productivity gap with its competitors.

The
survey also suggests that medium-sized and larger UK-based firms, along with
companies in the transport manufacturing sectors (mainly motor vehicles and
aerospace) are performing as well, if not better than, their competitors.

Commenting
on the report, EEF chief economist Stephen Radley said:  "The survey proves that investing
across the board in capital equipment, skills and innovation holds the key to
success. However, even this may not be enough if companies are not making the
best use of modern working practices.

“But
there are also some very positive messages for UK manufacturers from this
survey. The success of our transport manufacturers and our medium-sized and
larger companies shows what can be achieved. The challenge is to get far more
companies to match these standards,” he added.

The
survey also provides a number of pointers as to how improve UK company
performance. Larger firms have a key role in encouraging their suppliers to
improve their performance. In addition, government programmes such as the
Manufacturing Advisory Service have an important role to play in helping
companies to identify and remove barriers to improving productivity.

To
raise the UK’s performance on innovation, the EEF has urged that the increases
in government spending on science promised in the forthcoming spending review
be matched by targeted business support that addresses current weaknesses in
collaboration and networking.

Key
findings:

Investment


Increases in UK investment have lagged behind France and Germany over the past
12 months. UK firms are less likely to see trends in investment as positive for
their productivity levels


Lack of internal finance remains the major constraint on UK investment with
twice as many firms citing it as a barrier than firms in Germany


Payback periods are shorter in the UK than in France and Germany.


UK firms are more likely to use management discretion to block investment
projects


Improving UK performance depends on a range of factors including minimising
cost burdens, improving profitability through greater use of modern working
practices and encouraging related improvements in skills and innovation.
However, the Government could help by introducing measures such as capital
credits, which address cashflow constraints on investment.

Innovation


More UK firms undertake innovation in existing/new services to customers,
suggesting that they are leading the way in adapting to the demands of modern
manufacturing


UK firms are more likely to undertake a range of innovation activities, but
then struggle to translate this into new revenue streams


UK firms lag behind German companies in the level and effectiveness of
collaborations with academic institutions


UK manufacturers also use networking less frequently than German firms to find
out information on technological developments, collaboration opportunities and
sources of assistance. They tend to find this networking less effective than
companies in France and Germany.

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