As re­gions fall be­hind, we need to in­vest in our fu­ture

Yorkshire Post - - OPINION -

AS ONE of the re­gions that ex­pe­ri­ences low pro­duc­tiv­ity, York­shire will have been brought lit­tle cheer by the lat­est Of­fice for Na­tional Sta­tis­tics’ fig­ures on the topic.

Year-to-date out­put per hour of UK work­ers has fallen by 0.6 per cent, but more wor­ry­ingly, it re­mains lower than be­fore the fi­nan­cial cri­sis.

In com­par­i­son with our in­ter­na­tional peers, the UK’s per­for­mance is, to put it bluntly, dis­mal. In the con­text of the UK’s cur­rent ne­go­ti­a­tions with the EU, it’s worth not­ing work­ers in Ger­many and France pro­duce between one fifth and one quar­ter more out­put per hour than their UK coun­ter­parts.

But it’s not only on the in­ter­na­tional stage where the in­equal­i­ties are strik­ing. Lon­don’s out­put per hour stands some 32 per cent above the na­tional av­er­age. York­shire is trail­ing be­hind.

Clearly, in­dus­try dif­fer­ences ex­plain part of this – Lon­don’s dom­i­nance in fi­nan­cial ser­vices pro­pels it to the top. Yet, the South-East out­per­forms in terms of out­put-per-hour even in man­u­fac­tur­ing sec­tor pro­duc­tiv­ity.

And the prob­lem is set to get worse. Ac­cord­ing to TUC es­ti­mates, York­shire and Hum­ber­side is pro­jected to see its share of GDP fall by 0.5 points to 6.1 per cent in the next five years. By con­trast, Lon­don and the South-East will to­gether ac­count for two fifths of the UK econ­omy by 2022, up from one third in 1997.

So, what can be done to boost pro­duc­tiv­ity? And most im­por­tantly, how can we en­sure it is not re­stricted to a hand­ful of re­gions?

While UK work­ers are less pro­duc­tive than their French coun­ter­parts, the level of un­em­ploy­ment at home is less than half. One ex­pla­na­tion could be the UK’s rel­a­tively flex­i­ble labour laws and, up to now, plen­ti­ful sup­ply of over­seas labour.

Th­ese fac­tors have en­abled firms to hire staff to meet ad­di­tional de­mand, rather than in­vest in plant and equip­ment. The re­sult is the high­est num­ber of peo­ple in work, when mea­sured as a share of the labour force, since records be­gan.

High em­ploy­ment is not a bad thing, but with­out ris­ing pro­duc­tiv­ity, em­ploy­ers are of­ten un­will­ing or un­able to raise wages in real terms.

This begs the ques­tion: why can’t we have both low un­em­ploy­ment and high pro­duc­tiv­ity, some­thing Ger­many seems ca­pa­ble of? The an­swer is, we can, but it will re­quire sig­nif­i­cantly more in­vest­ment to en­able the UK work­force to re­alise its po­ten­tial.

In­vest­ment aimed at rais­ing pro­duc­tiv­ity is not just a task for firms: the Govern­ment also has its part to play.

When the UK leaves the Euro­pean Union, an in­dus­trial strat­egy backed with sig­nif­i­cant in­vest­ment will be­come im­per­a­tive. I take en­cour­age­ment from the fact that the Chan­cel­lor looks to be fol­low­ing in his pre­de­ces­sor’s foot­steps by cham­pi­oning a re­gional strat­egy.

In­vest­ment in in­fra­struc­ture and train­ing should be im­me­di­ate pri­or­i­ties. The UK is a world leader in a num­ber of in­dus­tries, but we must build on this suc­cess as new ones emerge.

More progress is needed in trans­port in­fra­struc­ture. It is wor­ry­ing to note that trans­port spend­ing per head in York­shire and the Hum­ber is roughly just one tenth of that in Lon­don.

Im­prov­ing trans­port links across the whole coun­try will im­prove in­ter­re­gional con­nec­tiv­ity, trade and bring more of the work­force within reach of more jobs. Steps are be­ing taken in the right di­rec­tion, with the Chan­cel­lor an­nounc­ing £300m for rail im­prove­ments in the North dur­ing the Con­ser­va­tive party con­fer­ence.

Ac­cord­ing to the Bri­tish Cham­bers of Com­merce, some 70 per cent of UK busi­nesses ex­pe­ri­ence problems with mo­bile cov­er­age in their lo­cal area. Such poor con­nec­tiv­ity in some parts of the UK is likely ham­per­ing growth op­por­tu­ni­ties and caus­ing un­nec­es­sary de­lays.

The Govern­ment’s £400m Dig­i­tal In­fra­struc­ture In­vest­ment Fund should help to ad­dress some of th­ese problems, but it shouldn’t stop there.

Train­ing is of­ten over­looked. An un­skilled work­force is not a pro­duc­tive one. More money is al­ways wel­come, but a more ef­fec­tive route might be to give more power to re­gional bodies to de­cide how best to use ex­ist­ing re­sources. Each re­gion in the UK has its strengths and weak­nesses, which should be iden­ti­fied and the work­force up­skilled ac­cord­ingly.

Tar­geted in­vest­ment at a re­gional level is needed to help re­bal­ance pro­duc­tiv­ity in the UK. Clos­ing the gap between the South-East and re­gions like York­shire could in turn en­cour­age fur­ther in­vest­ment and help lift pro­duc­tiv­ity for the coun­try as a whole, thereby de­vel­op­ing into a self-re­in­forc­ing cy­cle.

Pri­vate com­pa­nies have their part to play, but a strong ap­proach from the Govern­ment, en­com­pass­ing tar­geted in­vest­ment at a re­gional level, must lead the way. With bor­row­ing costs at his­tor­i­cally low lev­els, the time to in­vest has ar­guably never been bet­ter.

As the UK pre­pares to leave the EU, in­creas­ing our pro­duc­tive po­ten­tial is the best way to en­sure that re­gions like York­shire can reap the ben­e­fits of the UK con­tin­u­ing to com­pete and suc­ceed on a global stage.

A Eurostar power car at the High Speed Rail Col­lege in Don­caster. Trans­port and skills will be vi­tal to clos­ing the pro­duc­tiv­ity gap.

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