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The Root of the productivity problem

by Timothy Barlow

October 2018

London is the second most productive business district in Europe but it also has the highest failure rate of new business. UK plc nationally has one of the highest failure rates of new business across Europe. Desperately worryingly is the productivity gap between the best and the rest of our business districts. Strip London of the financial services sector (35% of our GDP) and the position is much worse (falling off the graph due to the scale) and it becomes evident that businesses in London need to improve as much as those everywhere else; because less business income means a much lower GDP figure and less government income and spending unless they can raise revenues through taxes and borrowing.

Scotland, East Anglia, the North West, the South East, West & East Midlands, the North East, Northern Ireland, Yorkshire, Humberside and Wales (and all businesses in those regions) perform considerably worse than most of Europe dominating positions 40-50 in the EU Business Region Productivity Table.

Our People Our Problem

Those domiciled in this country have a tendency to react defensively to direct criticism. However, we don’t have or use all necessary skills, we are not productive enough and we are showing no signs of making up the ground. If you like working longer hours for less money with fewer options available to you and a lower standard of life when you do finish work, fine. If you don’t read on.

In 2017 in the UK there were 5.7 million SME businesses; 99.9% of whom employed 0-249 employees (a contribution to the workforce of 16.1million people, 51% of workforce). 589,008 new businesses were launched in the UK in 2017 but 80% of those businesses launched failed in their first year, half of the remainder will survive their fifth year. 80% of mergers and acquisitions fail to deliver the gains or benefits that were expected. The median annual profit of a UK SME is £8000 and their average net worth is £90,000, which is falling.

There is access to funding, mentoring and business support, the desire is there and business executives are eager to achieve profits. What is going wrong?

Our collective performances show our competitive and comparative advantage has disappeared from swathes of the country and there are signs that our mature economy is falling into decline or more accurately, decay. Our economy, which once led the world, does not now innovate enough, our manufacturing base has been usurped, our service sector does not deliver adequately, only our finance and capital sector show real strength, but while it does, it skews the UK GDP figures and makes our economy look a lot better than it is.

Upskilling yourself, your staff and promotion through the ranks is essential, but if your new managers have never had any HR & Management training, you’d be wise to ensure they get some before they get their hands on your results. Imagine what would happen if I (trained in Business & HR) suddenly decided I was going to be a dentist or a pilot or a welder. Result – disaster; however, when a trained and specialist dentist, pilot or welder decide they want to run a business, they obtain the paperwork from Companies House and set out without necessarily having people management, leadership or business qualifications or experience.

Root of the problem is also the solution

The problem is in the hands of our Managers who are responsible for the outcomes of their employees and in turn our economy; so, this is about our people (of all levels, occupations and seniority) and the way they act at work. GB workers in 2017 were 35% less productive than our German and 30% less productive than our French counterparts, meaning it takes us five days what it takes them four days to do and the gap is widening.

UK Nationals can be every bit as productive as our International allies so the root of the problem lies with the circumstances or environment in which we work. With our people making our businesses and our businesses making our economy, the problem must be addressed by the managers who are trusted with their performance.

There are a mass of products and services designed to help managers and executives but without a deep knowledge or understanding the majority of organisations see their Human Resource function as a cost centre, an employee administration function rather than a profit centre and only employ some of what is needed when managing a complicated and high-value resource.

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