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London has had no productivity growth since 2008

Byte-size Bulletin by Rachael Brown in Productivity, News on Sep 25, 2021


This week is London Tech Week, where tech leaders, thinkers and innovators come together in the nation's capital to discuss the challenges and opportunities of UK tech in 2021.  

One of the standout challenges that has been highlighted already is the low productivity growth in the UK, particularly in London and the South.  

Mario Gruber, research fellow at King’s Business School and co-lead of the London and the South Productivity Forum, has brought this issue to light. The productivity forum, part of the Productivity Institute has been researching this reality, and how to potentially correct it, for quite some time.  

The situation is so dire, according to Gruber “London has had virtually no productivity growth since 2008”.  

This despite it is estimated we spend “a whopping 50% more on R&D to equal the OECD”. Spending that only leads to the UK ranking 126th out of 148 countries.  

The reason for this lack of productivity growth?  

Well, the 2008 financial crisis and of course Covid 19 have had their own unique impacts on productivity in London and the South. But the reason may be more closely traced to a poor alignment of skills in the UK labour force.  

The productivity institute found that the top 10 businesses are shockingly, three times more productive than the bottom 10. The reason for this is that those lower-ranking businesses tended to have a low-wage workforce with lower levels of technology skills. 

Gruber in his evaluation of 22 countries concluded that the UK has the worst alignment between skills acquired via training at work and skills important for job performance.  

This poor alignment feeds not only into low productivity in general, but also in industry's ability to retain skilled staff. Gruber argues intermediate, industry-specific and technical skills have to be developed by businesses.  

Currently, university graduates and their advanced skills are not being fully utilised, leading them to move on to different companies and other opportunities. Then, the organisation has to spend resources, time and effort scouting for the right replacement and then training them to the standard of the employee who left before.  

Apprenticeship is one approach. Gruber believes that less knowledge-intensive jobs can be upgraded to enable new recruits to deal with more complex problems, work in teams and take advantage of digital technologies.  

However, he and the productivity forum make clear they believe SMEs will not be able to close this productivity gap without support from the government.  

Photo by Lucas Davies on Unsplash

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