The United Kingdom's productivity gap: Its size and causes

Abstract

The level of labour productivity in British manufacturing industry is compared to that of the USA and Germany and other industrial economies. American levels of output per head have been two to three times those of the UK throughout this century, while Germany overtook British manufacturing in the 1950's and now has a comparative productivity at least 50% higher. The acceleration in UK productivity growth since 1979 has not yet removed much of the productivity shortfall relative to the rest of the Western world. A review of previous studies shows that Britain has its worst comparative performance in those sectors which tend to be skill and technology intensive; engineering is a notable example. In our consideration of possible explanations of Britain's comparatively poor performance more stress is placed on the human inputs of labour and management than on the quantity of capital, the level or variability of demand, plant or firm size, industrial structure and the degree of foreign ownership. Institutional and cultural factors have produced workers and managers who are not appropriately skilled to achieve the standards of their German or American counterparts in terms of either physical productivity or ‘value’ productivity (products with value-added, enhanced by superior quality, design, technology or reliability).