While productivity growth has been near its strongest since the recession in recent quarters, it’s still too early to begin heralding this as the start of a new trend.
For starters, a drop-off in hours worked played a key role in pushing up the numbers, while all-important output growth has continued to be modest. So, policymakers need to keep their foot on the gas. Business leaders would encourage the government to push forward with consultations and with allocating funding from the Industrial Strategy, to help kick-start the economic engine.
Solving the productivity puzzle will require a comprehensive approach. Directors want to see improvements in the nation’s physical and digital infrastructure, to help boost idea diffusion and connectivity between regions.
But macro investments need to be matched by direct support for businesses, particularly the ‘long tail’ of low productivity SMEs. These firms need greater assistance to absorb new technologies and to upskill their workers and management in order to deliver efficiency enhancing changes to their organisations.”