British workers have endured a “lost decade” of pay owing to issues with productivity, the Bank of England’s chief economist has claimed.
Andy Haldane, the chairman of the new Industrial Strategy Council, told The Yorkshire Post that the majority of UK workers had less money to spend than they did 10 years ago owing to the lag in productivity with other major economies.
In his first ever interview in his new role, Mr Haldane said that the 20 strong council would act as an independent monitor of the current and any future Government’s adherence to the Industrial Strategy’s targets, saying the body would be tasked with keeping Government’s ‘feet to the flame’ on its delivery.
Speaking ahead of a major speech in Leeds, Mr Haldane said: “The purpose of the Industrial Strategy is to fix some of the foundations of the economy.
“We have a problem of productivity in this country and we have a problem which is the mirror image of that with pay.
“We have had a lost decade of people’s inflation adjusted pay. The majority of workers across the UK have less to spend now than they had 10 years ago, and that’s the brutal truth of it.
“This is a very unusual situation to have found ourselves in and the proximal cause of that is because productivity has stood still.
“The problem could not be more important for people’s pay packets - it is as simple as that.”
In the 10 years prior to the global financial crisis, UK productivity grew at an average of 2.25 per cent per year but in the decade since it has grown at just 0.5 per cent, leaving the nation’s productivity around 20 per cent lower than the trend it followed before the crash.
Mr Haldane said that despite the UK being home to many of the world’s most innovative companies, issues such as effective management and skill levels were behind those seen in its principal international competitors.
We have had a lost decade of people’s inflation adjusted pay. The majority of workers across the UK have less to spend now than they had 10 years ago, and that’s the brutal truth of it.Andy Haldane
He said: “It is about improving education, it is about improving skills in the workplace, it is about improving management, it is about investing in machines which do things more efficiently, it is about sparking ideas and innovation and it is about having decent infrastructure, both transport infrastructure and digital infrastructure.
“These are the foundation stones of making an economy work, too few of those foundation stones are in place. That’s why we have got a pay and productivity problem.
“The industrial strategy is about trying to fix some of those foundations.”
Mr Haldane posits that the productivity gap is felt regionally and internationally. There is a one third gap between nation’s most productive region, London, and its least productive, Wales and a similar size gap between the UK’s productivity and leading competitor nations such as France, Germany and the United States.
The Industrial Strategy Council will issues a report on a once a year basis to assess how the Government is fairing in terms of meeting its commitments, a process Mr Haldane compared to “marking the Government’s homework”.
“What we have seen in the past is that Governments have been full of good intentions about fixing the foundations. The problem has been on delivery and follow through. The strategy has lacked longevity. And I hope what this council can do is to keep Government’s feet to the flame in delivering on this stuff.”
Part of the plan to address the productivity gap, Mr Haldane claimed, would be trying to ensure the best practice and innovation seen in high performing companies was shared across industry.
Referring to Fraunhofer system in Germany which applies this model, he said: “We have companies here in Leeds doing world leading things. We don’t lack for inspirational companies, with high inspiration, high R&D, high performance, we have got loads of them across the UK.
“The problem is we also have a long tail of companies who have missed out on this fairy dust of innovation.”