Britain could get £83bn boost if regions halved productivity gaps

UK regions drag down Britain when it comes to productivity, with Wales, East Midlands and Yorkshire most under-performing areas

Britain would boost its economy by £83bn if regional productivity gaps were just halved.

Only London and the South East outperform the national productivity average, with Wales, the East Midlands and Yorkshire and the Humber the lowest-productivity areas.

If the 10 most under-performing regions could each make up just half their productivity gaps with average UK productivity, then UK GDP would be 4pc larger, according to PwC.

>See also: Small Business Minister Kelly Tolhurst – ‘Tech is key to solving productivity’

Employees working in small businesses account for 99.9pc of all business workers, while SMEs account for 99.3pc of all companies.

British output per worker though is between 10pc-15pc lower than it is in Germany, France and Sweden and more than 30pc behind the United States, PwC said.

Matching Germany’s average productivity would boost the economy by £180bn. per year.

Companies need to invest in  staff training schemes, especially whe it comes to digital skills, PwC urged, while the next Government must invest in transport infrastructure.

John Hawksworth, chief economist at PwC, said: “We find, for example, that a 1pc increase in skills is associated with a 2pc increase in productivity in a local area.”’

Britain has suffered a lost decade when it comes to productivity, which is defined as output per hour worked and is the man driver of long-term economic growth.

Since the financial crisis of 2008, it has grown by just 0.6pc per year on average, compared with 2pc a year before the great recession.

“Evidence suggests that this productivity shortfall is due to low levels of investment and R&D spending and a longer tail of companies and workers with relatively low productivity and skills,” said Alex Tuckett, senior economist at PwC.

Earlier this month, the Labour Party announced that it would be nationalising broadband and providing free access partly in order to boost the UK’s productivity by £59bn – a move widely slammed by the City and telecoms operators but supported by London mayoral candidate Rory Stewart, for one.

Further reading on productivity

Ed Vaizey on productivity: ‘Network with other businesses. It’s what MPs do all the time’

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Tim Adler

Tim Adler is group editor of Small Business, Growth Business and Information Age. He is a former commissioning editor at the Daily Telegraph, who has written for the Financial Times, The Times and the...

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