"Urgent" action needed on productivity, say manufacturers
Research shows that UK productivity growth has flatlined. The manufacturers' association, EEF, outlines recommendations to reverse the worrying trend.
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According to the report, 'Unpacking the Puzzle', no single factor could completely explain the productivity performance of all manufacturing sub-sectors. Calling for a targeted solution, EEF’s said its initial assessment of what was needed had identified the following:
- Size matters, with larger companies being able to exploit economies of scale, vertical integration opportunities and with it, higher levels of productivity. EEF's analysis shows sectors with a higher share of larger firms tend to outperform internationally.
- Boosting capital investment is not a silver bullet solution, for some sectors significantly investing more may not bear fruit. As an example, despite Italy having higher levels of investment in capital equipment compared to Germany, productivity levels in Italy are weaker.
- More UK manufacturing sectors undertake ancillary services as part of business operations compared to international counterparts. This suggests UK manufacturers are more likely to be at the end of value chains where the opportunities for productivity growth may be lower, but profits higher.
- Management practices across UK manufacturing do not reflect international best practice with a long-tail of companies with poor management practices. Evidence suggests companies with better management capabilities are more likely to have higher rates of productivity growth.
A Business Department spokesman said: "Britain has a proud manufacturing heritage and through our modern Industrial Strategy we are committed to growing our productivity and improving people's earning power."Our plans for the Made Smarter Commission, a joint government-industry body responsible for driving up manufacturing productivity, will be revealed in the coming weeks."We will also shortly set out details of the independent experts on the Industrial Strategy Council that will hold us to account delivering our ambitions."Publication of the survey coincided with a report from business advisers BDO indicating that, despite a fall in manufacturing and services output in March, companies remained optimistic about their financial prospects on the back of strengthening household incomes.Peter Hemington, a partner at BDO, said: "The optimism of both the manufacturing and services sectors is encouraging for the health of the UK economy in the face of underwhelming business output."Weathering a string of shocks to the UK economy, which include a slowing eurozone and continued geopolitical uncertainty, comes down to good management from business leaders."Expectations for a Bank of England interest rate rise this month now look increasingly remote, but well-managed businesses will still be looking for ways to insulate themselves against further shocks."For related news and features, visit our Enterprise section. Find out more about our upcoming Relocate Awards. Relocate’s new Global Mobility Toolkit provides free information, practical advice and support for HR, global mobility managers and global teams operating overseas.Access hundreds of global services and suppliers in our Online Directory
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