9 January 2019 | By Pauline Biddle Community

Power Up the regions to improve productivity

Deloitte UK’s Pauline Biddle on the essential role the UK regions play in addressing the productivity puzzle

Ask any business, educator, local government official or influencer to pinpoint why UK productivity falls behind many other major economies and you’ll get a range of different answers.

The productivity puzzle has been long debated and while there are sectors that are successfully rising to the challenge, there is much more we can do.

Our latest Power Up report has taken the overall topic of productivity to help identify where we can maximise opportunities by learning from the past.

Taking a unique look at productivity and employment through the analysis of over 20 years’ of ONS data across Wales, Scotland, Northern Ireland and the eight regions outside of London, the report combines stats with real experiences and views of those responsible for driving growth.

The data provides some eye-watering stats. For example, if we took the best regional performer for each sector and replicated it across the UK as a whole over the last 20 years, it would be worth an additional £263bn to the economy, or nearly £10,000 for every UK household.

Inevitably, the slowdown in productivity has had a tangible effect on the regions and we often see a trade-off between productivity levels and employment rates.  Since 1997 productivity growth in manufacturing has been strong, but it has also witnessed a sharp decline in employment.

Conversely, there are sectors where productivity and employment have grown in tandem such as IT, Professional Services and the Science and Technology sector.

So what have we learned?

Data is only half the story

Although data provides hard evidence of where our strengths and weaknesses lie, it is only half the story. To really get under the skin of the challenges the UK faces, we interviewed more than 50 business leaders, academics, local government officials and key influencers across our regions and nations – and it proved invaluable.

Within our countries and regions lies a formidable combination of heritage and expertise and, above all, opportunity.

Although each region and nation has its challenges, those we met were united in how greater collaboration and investment in skills and infrastructure is key to unlocking productivity.

The overwhelming sentiment from the business leaders we spoke to was the need for investment, particularly in infrastructure and skills. We were told loud and clear that in order to grow and attract business, and to embed new ways of working and technologies, infrastructure must be fit for purpose.

Skills are at the heart of the report and from an economics perspective, regions have seen remarkable success in generating work, creating seven million jobs since 1982 and taking employment to record levels. However, it is imperative that the UK anticipates which skills it will need in 10-15 years and beyond.

Regions need to plan and execute place-based strategies and work with recently appointed metro mayors in our city regions. But they also need to ensure that other areas do not lose out unfairly in terms of spending and investment allocation.

The UK’s industrial strategy is already pretty well advanced. However, government needs to understand the local economy and local enterprise partnerships (LEPs) must play a front and centre role. Where there is more than one LEP in a region, greater collaboration is required. But with businesses, policy makers and educators on board, LEPs working in unison at a national and regional level can only be positive.

Although progress has been made on the productivity agenda, there is more to do. Business needs to see a clear devolution framework, action to advance educational attainment and a focus on regional infrastructure.

These foundations – combined with continuing collaboration between policymakers and business leaders – will help ensure that we make the most of this opportunity to create a healthy and balanced UK economy.

While there is no single definitive answer to productivity, we certainly have a new perspective – so let the debate begin!

Power Up: UK-wide growth. Unlocking productivity across UK region and nations is the third Deloitte UK Power Up report.

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