The UK needs to invest in its economy, promote better leadership and improve learning if it is to tackle its productivity issues, according to researchers.
The Business Time report by the Resolution Foundation in conjunction with the Centre for Economic Performance accuses policymakers of focusing on output at low productivity organisations, rather than economy-wide strategies.
A worker in the top 10% of companies is 16 times more productive than one in the least productive tenth, but raising output among those in low-productivity businesses would only raise overall productivity by 1.2%, according to the think tank.
The country’s levels of productivity, measured in terms of output per hour worked, have remained lower than G7 peers for some years – yet total investment in the UK economy only rose by 1% in the past five years, according to the Resolution Foundation.
This was in comparison to an average increase in investment of 16% in France, Germany and the US.
The report said one of the key areas of underinvestment was in human capital.
“Despite rising tertiary education attainment, there are gaps in basic and technical skills that hold back productivity of workers and firms in the UK.
Moreover, research has shown that skilled workers and managers are more likely to successfully adopt productivity-enhancing technologies and management practices.”
Ensuring workers are adequately equipped for technological changes could help address these challenges, it added.
Other factors include the quality of leadership, with the Resolution Foundation pointing out that just 11% of UK companies are as well managed as the best 25% of US employers.
Levels of literacy and numeracy would urgently need to be addressed too, it recommended. Literacy among 16 to 24-year olds is no higher than among older cohorts (55 to 65), despite impressive generational improvements in France, Germany and the US.
Greg Thwaites, research director at the Resolution Foundation, said: “Britain is facing a decade of huge economic change from the triple impacts of Brexit, Covid and net zero. “It will be UK firms that ultimately determine whether we navigate these changes in a way that leaves our businesses, pay packets and household incomes in a much better place by 2030.
“The UK entered the 2020s with an abysmal productivity record, and a misdiagnosis of why this is happening.
Rather than focus on the UK’s long-tail of unproductive firms, we need to see economy-wide improvements to how firms invest and innovate, as well as how staff are managed and trained.
“These are not quick productivity fixes, and they are likely to cost money in the short-term. But they need to be pursued as part of a new economic strategy that will deliver stronger growth and higher living standards in the years to come.”