Productivity started to slump during the credit crunch, and despite today’s figures showing a tiny improvement, solving the productivity puzzle is one of the biggest challenges facing HR at the moment. The lack of productivity among UK workers is making headlines – with small family firms and Wales, Northern Ireland and Sheffield showing the biggest productivity gap.
Here is a summary of today’s findings:
- Output per hour worked increased by 0.4% in Quarter 3 (July to Sept) 2016. It is a small improvement but according to (ONS) economist Richard Heys: “It is still weak compared to that experienced in the recent past.”
- Estimates of labour productivity for the UK regions suggest wide variation in productivity, ranging from 32% above the UK average in London, to almost 20% below the UK average in Wales and Northern Ireland in 2015.
- The ONS claim that new analysis of data on the management practices of manufacturing businesses suggests that firms with more structured management practices tend to have a higher level of labour productivity and small, family run businesses have poor management practices.
- Experimental estimates suggest that market sector capital services grew by 1.8% in 2015, the fastest annual rate since 2008, albeit well below the pre-downturn average.
- New estimates indicate that public service productivity increased by around 0.2% in 2014, supported by productivity growth in public service healthcare of 2.3% over the same period.
The data analysed regional variances, and Wales seems to show the lowest productivity levels across the UK as a whole:
The ONS attributed the success in the south at least partly to London’s financial district, similar rises were seen in Aberdeen due to the concentration of the oil industry.
Further analysis from the ONS showed that poor management practices in family run manufacturing firms were a big contributive factor to poor productivity, which it claimed could be improved by better management.
HR Software expert Adrian Lewis of Activ Appraisals said he was saddened by today’s statistics.
“I’m saddened to see Wales being compared unfavourably to London’s affluent financial hub, I’m proud to be based here and I think today’s results will make many welsh employers feel alienated from the rest of the UK, who don’t understand the challenges Wales has faced.
“Our traditional big industries in Wales, steel and coal have mostly gone, those that remain are still struggling to recover against a climate of continual instability and constant job cuts. Sheffield, also singled out in today’s report has gone through a similar experience.
“Meanwhile, our family firms who have taken up the slack have had to retrain redundant staff from those industries and find new customers to replace their bigger clients. Unemployment has fallen, we have retrained many workers and yet Wales is being compared unfavourably to the ‘productive’ finance district in London – who received a lot more support from Whitehall and still kept their bonuses. We shouldn’t forget the banks still owe the UK taxpayer billions after the 2009 bailout, it wasn’t Whitehall saving welsh jobs, but small, family run manufacturing businesses who kept on going when it was tough.
“Whilst many smaller firms would benefit from introducing performance appraisals, and maybe there is room for improvement among family business owners who never received management training, I don’t think Welsh family firms deserve the criticism or comparisons in today’s report – we should be thanking them for creating employment in a cash deprived region. Wales needs stability, investment and support.”
Ian Brinkley, Acting Chief Economist at the CIPD, the professional body for HR and people development, comments:
“These are disappointing figures overall, with little sign that the persistent under-performance on productivity is coming to an end. Many organisations will be unable to offer higher wages as a result, meaning significant numbers of workers will feel poorer in 2017 if inflation continues to rise as anticipated.
“There may be more room for pay rises in some sectors. For example, productivity per hour is rising more strongly in some low pay industries, such as wholesale, retail and hospitality than in the rest of the service sector, which may reflect the impact of the National Living Wage.
“The government’s productivity plan must correct a serious omission in the lack of significant new investment to support adult skills training and development if it is to address the underlying reasons for poor productivity growth.”