Productivity growth has “been a cause of serial disappointments over the past seven years.” So said Sir John Cunliffe, Deputy Governor Financial Stability at the Bank of England, in a speech which he gave at the recent Automotive Fellowship International Dinner. It’s not all bad news; productivity in the car industry has risen by 30% since the start of the financial crisis. According to Sir John, if the rest of the economy had followed the car industry’s lead the UK economy would be some £0.5trillion higher than it is today.
Unlocking the productivity puzzle is no easy matter but it is something which is exercising the minds of economists across the board. If the car industry’s productivity has grown by 30% in the last seven years, how come overall productivity has been floating around the 0% growth mark? In his speech, Sir John admits that we may never find the answer. After all, economists have never fully understood the vast increase in productivity seen in the industrial revolution so it is not surprising that there is some way to go before we fully understand the effects of the recession.
For businesses, this lack of productivity growth presents enormous challenges. With the labour market rapidly running out of new candidates businesses cannot afford to continue to merely throw people at increased workloads. This is one reason why a culture of innovation becomes an imperative for businesses which want to drive the future. Looking at the challenges in a new way, creating real solutions which will not only shape future success but also improve productivity requires an entirely new approach to the business landscape.
Building an innovation culture does take determination but if the reward is increased productivity and a future proof business then the results easily outweigh the effort. After all, as Sir John says, productivity “is the key determinant of rising living standards” and that means it’s not just businesses that benefit but the country as a whole.