The Opportunity

Access our latest report, which sets out the opportunity UK businesses can realise by working together to tackle the productivity challenges they face.

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The productivity challenge

That productivity growth remains elusive is well known, much analysed and a long way from being resolved. The UK’s productive capacity is the single most significant factor in driving economic growth and raising living standards, both now and in years to come. Productivity gains secured from more growing businesses lead to higher profits and wages, increased tax revenues and stronger public finances. Making gains would be far reaching, socially and economically.

Does productivity matter?

Research we’ve undertaken has confirmed our view that productivity should be better in businesses of all sizes and across all sectors.

  • Two thirds of UK employees work in firms where productivity is below what is expected for a firm of that size or sector. The opportunity to do better is not just in small firms – but also in medium, large and very large firms.
  • A common factor explaining the UK’s decline is the quality of leadership and management compared to other advanced economies. While we have world class high performing businesses, there is a long tail of UK firms of all sizes where management performance falls behind the best international standards.
  • Ongoing innovation, emerging trends in digital connectivity and the challenge of rapidly developing economies are disrupting business models and transforming global markets.

So ‘How good is your business really?’ How do you compare to your competitors?

Chart 1 diagram

Fig 1: Productivity growth before and since the onset of the 2008-09 recession, G7 countries.

An opportunity for UK business

Businesses are best placed to respond to these challenges. During and since the recession the highest performing businesses continue to push the boundaries of what can be achieved. Others have an opportunity to follow their lead. Only businesses themselves can be committed to raising their game and seeking out opportunities to improve and innovate in how they operate. Only they can forge connections with other businesses and key partners who can offer support and help. In a modern, dynamic and more connected economy, securing success and competitive advantage will be increasingly reliant not only on developing unique internal capabilities, but on the value that can be drawn externally too.

  • If all except our most competitive businesses were able to improve their productivity to match the companies ranked 10% above them, an additional £130bn Gross Value Added (GVA) would be unlocked every year.

Acting now is essential before the productivity gap to our international competitors widens still further. To achieve success, we will require better business leadership, more ambition and concerted, enduring action on the ground. This means businesses working together through active communities they recognise in sectors, regions and supply chains to drive better performance. We believe the opportunities for businesses across the UK are huge and could transform the UK economy – the time to act is now.

Chart 2 diagram

Fig 2: Business productivity, by % of employees, UK and Germany 2013

Action is already being taken

Although many challenges still lie ahead, action is already being taken. The Productivity Leadership Group, formed in 2015, has been working with businesses to explore what practical steps they can take together to share learning and secure business improvements.

Our work is the first part of a much longer journey, and seeks to provide a catalyst for transforming British business culture and long lasting performance improvements, providing a focal point, and securing a higher number of better-run businesses across the UK.

We want to create a business-led movement that operates across the UK, focussed on creating practical solutions. This requires thousands of businesses to join the movement to create a better Britain. The movement must start quickly and, with your help, will grow fast.

To find out more about the work that has taken place with businesses already, and the opportunities that lie ahead, please take a look at ‘The Task Ahead’ section of the website and make sure you check out our ‘Business Marketplace’ to discover the practical business improvement tools that we are starting to develop.

The Task Ahead
Business Marketplace
Chart 3 diagram

Fig 3: Distribution of firm-level productivity in the non-financial business economy.

Where is action required?

Businesses are taking action in a number of core areas to secure improvements in how UK businesses are run and to keep up with developments in a modern economy. These include:

  • Ambition: what’s the scale of your leadership ambition?
  • Measurement: does your business make use of sufficient performance data to drive decision making?
  • Management: how effectively is your business managed in terms of the development and deployment of talent, the ability to organise work and efficient processes and operations to meet customer demands?
  • Innovation: is your business innovative enough, not only in products and services, but how it operates?
  • Digitisation: does your business make sufficient use of new technology and digital applications?
  • Governance and finance: is your business effectively governed?
Chart 4 diagram

Fig 4: The five areas that businesses must address to improve their productivity.

What to do next

To find out more about each of these areas, please check out our latest research report: ‘How Good is Your Business Really: raising our ambitions for business performance’, which you can access here.

Download the report

Please also take a look at the ‘How good is your business really?’ Business Marketplace, where we are developing practical business developed tools linked to each of the above areas for action.

Business Marketplace