A new strategy is urgently needed in the UK to improve lagging productivity and increase economic growth and raise living standards in the country, according to a research report published Monday by CIMA.
Over more than 10 years, a low rate of productivity compared with the UK's peers has led to the country's failure to return to the rate of growth it experienced before the 2008 financial crisis. CIMA's Tackling the U.K. Productivity Puzzle report found that if the UK were a US state, it would now be the poorest in the US in terms of median household income. That finding is based on a comparison of 2019 UK Office of National Statistics data with US Census Bureau data.
The CIMA report provides 35 recommendations for improving productivity in the UK and calls for a national productivity strategy to replace the government's Plan for Growth.
"Improving the competitiveness of British business is key to future standards of living across the country and addressing the levelling up agenda," Andrew Harding, FCMA, CGMA, chief executive–Management Accounting for the Association of International Certified Professional Accountants, representing AICPA & CIMA, said in a news release. "For over a decade it has been a puzzle and now with the headwinds of Brexit and the COVID pandemic, we need a strategic approach to business and productivity that grasps the opportunities of tackling environmental and social challenges."
The report supports existing calls for the creation of a productivity commission in the UK, to be set up as an independent research and advisory body similar to the Bank of England or the Office of Budget Responsibility. Harding said that in addition to performing analysis, the productivity commission should set specific, measurable, and attainable growth targets.
Meanwhile, finance professionals participating in a survey for the report said the main barrier to improving productivity in UK businesses is a mismatch between skills and market needs. The top reported barriers include:
- Businesses having difficulty hiring more employees with the right skills (18%).
- A lack of adequate existing skills within the organisation (16%).
- Having inadequate management skills and practices (12%).
"We must put a greater emphasis on investing in skills to help generate economic growth and tackle the long-term challenges this crisis has only exacerbated such as our low productivity, high dependency on lower-skilled workers, regional imbalance, and weak social mobility," Harding said. "The UK can't afford to play the waiting game on this issue."
The report suggests that businesses in the UK need to:
- Look more at international best practice for management skills and culture;
- Take more advantage of R&D and provide more research in line with that of their Organisation for Economic Co-Operation and Development peers;
- Continue promoting employees' wellbeing and supporting a culture of collaboration and care.
— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is FM magazine's editorial director.