UK productivity gap is closing up

UK companies are closing the productivity gap with their main competitors,
according to research published last week.

However, the study by Proudfoot Consulting identifies poor management as a
barrier to further improvements.

UK productivity, measured by the amount of utilised labour time, has
increased to 60 per cent – up 9 per cent since 2001.

This figure is similar to Germany and the US, where productivity levels
remain stable with 63 per cent of labour time fully utilised.

The improvement means this country has caught up with France, where
productivity has risen by 6 per cent to 60 per cent since 2001.

Despite these improvements, the report estimates that poor labour
productivity among UK firms in the private sector costs the economy £88bn per

Entitled Missing Millions – how companies mismanage their most valuable
resource, the study is believed to be the world’s most extensive research of
its type. It is based on more than 10,000 hours of observation of employees at
all levels of responsibility going about their daily work, and comprises
analyses of 1,440 companies in seven countries.

The study reveals the UK is still losing 85 of 225 working days each year
per employee, through mismanagement and other inefficiencies. Poor management
is responsible for more than two-thirds of this wasted time.

Low morale, ineffective communication and inappropriately qualified
workforces were identified by the study as specific problems affecting British

Nicholas Crafts, professor of economic history at The London School of
Economics, agrees that poor management is still a significant problem for
business in the UK.

"Clearly, this year’s Proudfoot study provides encouraging news about
UK productivity; it is nice to read a report on this issue in which UK firms do
not appear to be too far behind their international rivals," he said.

"Nevertheless, there is still great scope for more efficient use of
labour than senior management seems to recognise.

"Perhaps this is an issue on which the now fashionable shareholder
activism could usefully focus."

By Ross Wigham

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