Jonathan Byrne at Yorkshire Bank says increased productivity in the north could deliver £23bn boost to the economy
With the political and economic environment showing no signs of settling, we’re seeing businesses continue to exercise caution in their investment decisions. It’s therefore more important than ever for businesses to make sure they’re constantly looking for methods to improve productivity.
This is particularly important in the North of England where businesses of a similar size, sector and age are less productive than comparable enterprises in London and the South East. Earlier this year we sponsored research by the think tank IPPR North. In the report: Perspectives on SMEs and Productivity in the Northern Powerhouse, the findings revealed that raising the productivity in the North’s smaller businesses to match the national average would be worth approximately £23 billion per annum to the economy.
There are many measures of productivity, however the one often alluded to in demonstrating the UK’s productivity issue is GDP per hour worked – the measure of how efficiently labour input is combined with the production process to create output.
It’s said that an average German worker can go home on Thursday afternoon, having completed the same amount of work in which the average British person completes during the entire working week. But why do we suffer so much from productivity loss?
Many economists have tried to attribute the issue to factors such as slow wage growth, limited lending post-financial crisis and ageing working population. However, there is little conclusive evidence to explain why productivity has remained relatively flat – with productivity in Q2 falling 0.5% compared with the previous year.
This productivity slump appears even more unusual against the backdrop of an historically high employment rate in the UK. However, that may be explained by the fact that many of the working population are in low-paid and insecure work.
An example is the presence of the ‘car wash economy’. This is where existing automatic carwashes are undercut by workers manually washing cars. This isn’t good news for workers – higher quality jobs could be created in the manufacturing and maintenance of an automatic car wash.
Despite widespread debate on the cause of our productivity challenge; I am optimistic about our collective ambition to solve the issue in the coming years.
We plan to do our bit by harnessing the expertise of both our business customers and our business to share best practice on everything from understanding cyber security to using the power of data to enhance productivity.
We are in the midst of a UK start-up revolution, with a new generation of pioneering British start-ups embracing Artificial Intelligence (AI) and data, we can deliver exciting new opportunities to re-think business models. These companies are supported by a world leading infrastructure of academic research and expertise in this field.
While fears of AI destroying employment growth persist, we should begin to see better quality jobs created in new and evolving industries shaped by automation. With many repetitive tasks taken care of by AI, business will have more time to focus on being disruptive.
For any of us in business – including those of us in business banking – it can be hard to think beyond the short-term: beyond the challenges that are immediately in our path, but irrespective of what the near-term future holds, to be successful over the longer term businesses will need to embrace new and inclusive ways or working, make bold investment decisions and learn how to incorporate new technologies into established industrial sectors.
This article was written by Jonathan Byrne, Business Distribution Director at Yorkshire Bank