Closing the UK's productivity gap

2005

Smarter working and a more intelligent approach to employment regulation is the key to closing the UK’s productivity gap, according to the Chartered Institute of Personnel and Development (CIPD).

Its comments come as official figures have shown the UK’s gap narrowing substantially.

Figures from the Office for National Statistics said GDP per worker was now on a par with Germany and, in the past decade, the gap with France had narrowed from 26 per cent to 10 per cent and with the US from 34 per cent to 25 per cent.

GDP per hour had also improved, even though it was still 13 per cent higher in Germany, 16 per cent higher in the US and 26 per cent higher in France.

But before employers get too excited, CIPD chief economist John Philpott said the improvement was largely the result of sustained economic growth and a return to fuller employment.

"The major driver of improved productivity is likely to have been the return to ‘full employment’ and the impact this had had on employer practice.

"A tight jobs market has encouraged employers to raise investment in training and make more effective use of people,” he explained.

"Training spend has remained robust in recent years as employers have sought to cope with a lack of adequately skilled recruits.

"But in addition to this, the need to get more from existing staff has triggered improvement in working practices, such as regular appraisal, team based working and performance related pay systems," he added.

The best way to narrow the gap still further was to embrace to more effective management practice, he argued.

Government also had a role to play in ensuring that the burden of employment regulation was not so heavy as to distract employers from their primary task of running successful organisations.

"The challenge is to bring aspirant and laggard businesses up to the standards of the best performers, while government must adopter a lighter touch approach to regulation.

A combination of smarter working and a smarter approach to regulation will help the UK not just narrow but close the productivity gap," Philpott said.