productivity is still lagging behind that of France, Germany and Italy. But
with a new report showing that employees lack basic skills, employers must be
encouraged to train staff. Ben Willmott reports
The battle to close the growing productivity gap between the UK and its main
competitors must be fought on a number of fronts, according to a joint TUC and
The report follows six months of research and makes a number of key
recommendations for raising skills levels, spreading best practice, increasing
investment and encouraging innovation.
It reveals that France and Germany are more than 20 per cent more productive
than the UK, while Italy is over 7 per cent more productive.
One of the priorities highlighted is the need to improve learning and
development for employees and tackle the basic skills problems of individuals.
It recommends that the Government introduces a training tax credit for
employers that are involved in basic skills training or supporting employees
working to gain qualifications.
Margaret Murray, head of the CBI’s learning and skills group, said improving
the provision for learning and skills development is essential if the
productivity gap is to be addressed.
She explains, "We have a much longer tail in this country – 32 per cent
of the workforce is not even trained to NVQ level 2, and 20 per cent of the
working population has problems with literacy and numeracy."
Murray believes the introduction of tax credits for employers could have a
big impact in improving staff development.
The CBI and TUC also want to see more small and medium-sized businesses
become accredited to Investors in People to help them develop their employees
to benefit their own objectives and particular needs.
The CIPD agrees that improved learning and development will play a vital
role in closing the productivity gap.
John Philpott, CIPD chief economist, said, "I think the aim of getting
individuals to level 2 and encouraging more organisations to become Investors
in People is positive, but in order to be properly successful this has to be
implemented in the context of greater commitment to good people management
Philpott also applauds the report’s recommendation to promote the importance
of high commitment employment practices, but stresses the Government must
introduce polices to encourage this.
"I support the idea of a CBI and TUC working party being formed as
Gordon Brown and Patricia Hewitt have suggested, so this is not a one-off exercise.
They will be able to return to the issue and take on new ideas," he adds.
The report also calls for the introduction of research and development
(R&D) tax credits to promote innovation and technology.
Tim Bradshaw, the CBI’s senior policy adviser for technology and innovation,
told Personnel Today that the Foresight programme, which looks at future
priorities for R&D, should be transformed to increase its impact on
He said research by Toby Wall from Sheffield University reveals that the UK
is behind other countries when it comes to adopting new working practices such
as team working, employee empowerment, outsourcing and integrated computer
One of the other areas the report highlights as a reason for the UK’s poor
productivity is a lack of investment and the CBI and TUC urge the Government to
increase the share of GDP devoted to worthwhile public investment.
The study concludes that public infrastructure improvements produce returns
across the economy and can influence the future investment and location
decisions of multinational companies.
It also finds that weaknesses in managerial and project management skills
inhibit investment plans for some firms and emphasises the need for
organisations to ensure they have the right resources to manage potentially
Dougie Peedle, deputy chief economist for the Engineering Employers
Federation, agrees that there has been lack of investment in the UK compared to
overseas competitors and calls for the Government to step in to provide UK
manufacturers with investment incentives.
"There has not been the same degree of investment as some of our
competitors abroad who are able to use the latest capital equipment and have
more of it at their disposal," he said.
Peedle added that the EEF would like to see the introduction of capital
allowances or some other type of tax incentive to encourage UK employers to
He welcomes plans by the Government to introduce R&D tax credits, but
stresses they must be made available to as many companies as possible.
In the report, the CBI and TUC put forward a definition and framework of
best practice that they believe should be widely promoted and used by all
The study calls for an independent audit of working practices to be
completed to help provide evidence for decision- makers in business and
government about the links between adopting best practice and enhanced
"The gap between UK productivity and that of our main European
competitors has been a serious problem for decades. It is vital we address it.
"This agenda for reform represents a substantial step forward. In
reaching these conclusions, we have concentrated on practical areas where
people can make a really significant difference," says Digby Jones, the
CBI director general.
UK productivity falls behind other European countries
UK=100 1960 1973 1995
France 93% 111% 121%
Germany (W) 90% 105% 120%
Italy 69% 97% 107%
Source: US Employment Policy