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Lena Levy: Help yourself to productivity

Wednesday 24 June 2015


Lena Levy

Lena Levy is Head of Labour Market Policy at the CBI. Lena manages the CBI’s labour market policy team and holds ultimate responsibility for CBI policy on the labour market, pay, diversity and inclusion and health and safety. Lena also leads one of the CBI’s major projects this year, Ensuring growth makes a difference to everyone..

Lena Levy

For individual employees, improved productivity should translate into an improved pay packet. For the economy as a whole the pay-off could be even more significant. In A Better off Britain, the CBI argues that raising productivity in four high employment sectors characterised by low productivity could be worth up to £144bn to the UK economy.

But this is not going to happen overnight. Because the picture is complex - with some parts of the economy racing ahead, and others doing less well - macro-economic, Government-driven interventions are unlikely to be the best approach. After all, there is hardly one definition of productivity.

Productivity improvements need to be driven by businesses themselves, with Government providing an enabling environment around skills, financial and physical infrastructure and networks that support peer learning.

But what does this look like?

The best place to start raising productivity is with investment and innovation. Our A Better off Britain report found that in UK companies, returns on investment can be constrained by management practice. Between 1998 and 2007 improvements in labour productivity were responsible for almost three-quarters of the UK's economic growth. Yet we could do much better - management quality explains 10% to 15% of the productivity gap between the US and the UK.

Businesses also need to think about improving the design of their production processes. This means employers putting their people plans on a par with their financial plans. It does not mean making people work harder, or cutting the number of employees. It's about managing the process of change, how jobs are done and developing skills levels - working smarter.

We believe that helping mid-sized firms innovate is key to improving productivity. The Government can help by helping smaller and especially mid-sized firms grow. In particular, simplifying the support network around procurement, skills, exports and access to finance would encourage firms to invest in the changes they need to make real progress.

While ultimately it is only businesses that can drive improvements forward, mid-sized firms have particular challenges which are distinct from smaller firms. It is time to move on from the ineffective label "SME" to address the real and different needs of our 'gazelle' companies.

Of course, large businesses also have a critical role to play. They can act as anchors in supply chains by taking the lead in raising capability. There is real value in supply chain, sectoral or regional discussions on what improvement might look like and what business and Government action is needed.

Sharing in Growth is an example of an innovative and ambitious programme, led by Rolls-Royce with industrial knowledge and support from across the aerospace industry. It seeks to raise the capability of firms in the UK's aerospace supply chain so that they can share in the anticipated growth of this global market.

Finally, we simply need better data on productivity. A better understanding of the barriers to productivity growth facing firms in individual sectors would help government understand which of the levers it has will make a real difference. Such analysis can be reasonably delivered by the Office for Budget Responsibility, with sense-checking from business leaders. This is something the CBI would like to see the new Government kick start.

Read the full CBI article in Acas' report on pdf icon Building Productivity in the UK [644kb].

Read other blogs in our productivity series

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