February 23, 2007 | posted by Michael Baxter in IABN |

What are the two curses that are holding back the UK economy? Answer: lack of investment and poor productivity.

It seems hard to believe, but as British workers beaver away, with steam rising from their pens and keyboards, they produce less per hour than their counterparts in Germany, and a lot less than their equivalents in France and the US.

Okay, we know what you are thinking. We produce less per hour, because we work longer hours, but surely our total productivity is up there with the best.

Well, only partially so. If you give the average UK worker a score of 100, both for total productivity and productivity per hour it makes unhappy reading.

In terms of overall productivity, the US tops the G7 league with a score of 125. Then we have France with 109, Italy with 104, and there, smack bang in the middle sits Blighty.

But, of course, if you accept the argument we tend to work longer hours here, then in order to explain our relatively poor showing, our productivity per hour must be even worse.

Alas, the Office of National Statistics says precisely this. Again, they give the UK a score of 100. But this time, France, Germany and the US easily outdo us.

In fact, in terms of productivity per hour, France tops the poll, scoring 119, the US narrowly beats Germany into second, scoring 116 against Germany’s 115.

Perhaps a little surprisingly, the UK still sits in the middle, with Italy scoring lower on productivity per hour - implying your average Italian works even longer hours.

Bottom of the pack sits Japan, scoring just 83 for productivity per hour worked.

Previously when we published similar findings from the Office of National Statistics, we received email from readers suggesting we must have made a mistake. How could France possibly be scoring higher, they asked?

The figures become even more fascinating when you look at the historical trend.

And here, at last, we find good news. The situation is improving for the UK. Back in 1991, we were bottom of the chart for total productivity, and second from bottom for productivity per hour worked.

Perhaps of equal interest has been Japan’s fall from grace. Back in 1991, it scored 107 for productivity - easily outdoing the UK - but today it has managed just 88.

This, of course, begs the question why?

Why are we so less productive than the French.?

Back in the 1970s, we thought we knew the answer. Trade Unions were held up as the scapegoat.

Others turned to low investment. They said the UK consistently underinvests, and that’s your answer.

No doubt there’s a lot of truth in that latter explanation, but gaze even further back into the annuals of economic time, and you will find an economist called Solow, who appeared to disprove that the UK’s poor productivity was down to low investment. He took the level of change in economic growth, compared it with the change in investment, and the difference was called the residual. And the UK had a much lower residual level that most other economies. In other words, not only was our productivity low, it was worse than you would have expected given the level of investment.

This promoted a debate on the role of unions. All the more ironic then, that in today’s post-Thatcher period of union reform, we still lag behind France, with its union dominated work force.

There are plenty of possible explanations. Maybe we do worse because of the UK’s awful transport system. How many meetings get delayed, or deliveries run late, because of the M25, or several other of the similar crowded car parks that we call motorways?

Maybe the problem lies in education. We just don’t educate our kids, or train our workers enough.

Maybe the problem lies partly in our success. Our employment is much higher here than in France, and, therefore, you would expect average productivity to be lower.

Whatever the explanation, the UK must do better. To compete on the world stage, we have to produce more per worker, plain and simple.