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Sun, 27 September 2020

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Low productivity has become ingrained in our economy

Low productivity has become ingrained in our economy
4 min read

If they are serious about building an inclusive economy, the Tories must reverse the prolonged stagnation in productivity, writes Dan Jarvis MP


In 1960, Britain boasted the highest level of productivity in Europe, but we’ve now slumped to the one of the lowest levels in the industrialised world. You would be forgiven for not recalling this being raised during the general election, because it wasn’t.

Productivity is one of the most important metrics by which the health of our economy can be assessed. It’s important not least because it gauges how efficiently we produce goods and services but also because it is a means of improving prosperity.

Despite its significance to the macroeconomic landscape, productivity does not elicit the attention it deserves, and certainly nowhere near the level of discussion that GDP or inflation announcements and trends generate. A cynic might argue the motivation for this is due to our sustained weakness in productivity growth in recent years.

In the 10 years leading up to 2008, productivity was growing at 2% each year, but since the global financial crash, it’s collapsed to an average growth rate of 0.3% a year. It was for this reason our productivity level was awarded the (in this instance unwelcome) accolade of ‘Statistic of the Decade’ by the Royal Statistical Society.

Economists are not short on theories for the slump but tend only to agree on one facet of the debate: there is no silver bullet solution.

As is the case with many indicators – including household income and life expectancy – once broken down by region, productivity is much worse in the north of England than the national picture portrays. There is no hiding from the fact that parts of the north, including many of the communities I represent both as an MP and a mayor, are suffering from a deep and prolonged productivity crisis. A crisis that is hurting workers and children from low-income households.

Recent analysis by IPPR North found the UK – in terms of productivity – is the most regionally unequal country of its size and level of development. Moreover, that this imbalance has endured for the past decade.

The causes of low productivity growth are ingrained within our economy and will only be addressed by pursuing a long-term strategy over short-term tactics. This means not only investing in infrastructure and skills but devolving power and resources to every region, city and town across our country.

“The causes of low productivity growth are ingrained within our economy”

For my part as a mayor, I am committed to transforming our economy by implementing a transformative Strategic Economic Plan. Tackling the productivity crisis in South Yorkshire is not an easy task but rebuilding our crumbling public transport system and reducing the skills gap are good places to start.

Transport is an essential public service and the lifeblood of our economy. The ongoing fiasco with Northern Rail is totemic of a system that is simply not fit for the 21st Century. We desperately need to invest in a sustainable, affordable, and integrated public transport system.

It’s why I’ve committed to a pan-northern transport strategy and asked Clive Betts to conduct a major bus review in order to understand how our bus services can better serve our communities. I’ve also appointed Dame Sarah Storey as our Active Travel Commissioner.

While government spending commitments on R&D investment are welcome, the narrow sectoral focus means that funds are often directed to places that are already prosperous. That’s why I have invested in the creation of dense innovation clusters, forged at the intersection of our capabilities and global economic opportunities and implementing cutting-edge partnerships between our businesses, our leaders and our region’s two world-class universities. By focusing on what we’re good at, we’ll build a more prosperous economy.

Following years of austerity and systemic neglect, the Conservative manifesto contained a raft of ambitious infrastructure projects and a promise to ‘level up’ investment across Britain, much of which was aimed at voters in the north. If the Government is serious about building a collaborative, sustainable and inclusive economy where everyone shares the benefits, reversing the prolonged stagnation in productivity should feature at the top of its agenda.

The way to do this is by redistributing power to our nation’s regions through a programme of meaningful devolution. Westminster needs to give us the tools to do the job.

Dan Jarvis is the Labour MP for Barnsley Central and mayor of the Sheffield City Region

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