2023’s National Productivity Week ended on 1 December, with the UK still grappling with the same challenges that were set out in IPA’s report published in 2014 - Involvement and Productivity: the missing piece of the puzzle.

Analysis of recent figures released by the Office for National Statistics shows that productivity in the third quarter of this year is now 24% lower than it would have been if the trend before the financial crisis of 2008 had continued and the UK trails German, France and the United States. The ‘productivity gap’ is still alive and well it would appear and, according to a new report from the London School of Economics and Political Science, this is due to lack of investment in capital and skills.[1]

According to the Productivity Institute “conventional mechanisms to drive productivity through technological change and innovation (whether stemming from scientific progress, technologies embodied in new machinery and equipment, or better business practices) have not been working as well since the 2010s.”[2] 

If not a ‘dash for growth budget’, achieving growth was clearly at the forefront of the Chancellor’s mind in the recent Autumn statement with the making of tax breaks for capital investment permanent. But in the absence of a joined up industrial strategy, where should the current, or next government, focus investment to get the most bang for the UK taxpayers buck?

In 2014, IPA called for investment in effective people management and leadership practices; closing the skills gap through improved education and training programmes; encouraging innovation both in introducing new technologies and in new ways of working; and for improving employee engagement and strategies for involving the workforce in workplace change through workplace voice and the trades unions.

Since then, we have had the Taylor Review Modern Working Practices which set out clearly the case that ‘better designed work that gets the best out of people can make an important contribution to tackling our complex challenge of low productivity’. And of course, the world has experienced a pandemic – fundamentally changing our to attitudes to work and the ways we work, with hybrid and remote working more commonplace, a greater emphasis on health and wellbeing of employees and higher numbers of working-age people excluded from the workforce due to ill health.

The recent expansion in the number of organisations exploring the introduction of shorter working hours, sometimes through a four day working week, achieved through productivity gains was highlighted in a recent blog by Professor Sir Christopher Pissarides, who noted that ‘Good work – work that offers dignity and autonomy, that has fair pay and conditions and where people are properly supported to develop their talents and have a sense of community – is one of the ways that productivity can be improved. As such, it should be as much of a focus as income growth and skills.’

Although the world has moved on since our first examination of the productivity puzzle, the IPA remains convinced that the answer lies with releasing the voice of UK employees.

[1] J. Van Reenen, X. Yang (2023) Cracking the productivity code: an international comparison of UK productivity. 

[2] B. van Ark, K. de Vries, D. Pilat (2023) Are Pro-Productivity Policies Fit for Purpose? Working Paper No. 038, The Productivity Institute.