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Can British business rise to the productivity challenge?

Only one in seven British adults say that they have benefited personally from the UK’s economic recovery[1]. Although the number of people in employment has been rising for the last two-and-a-half years, the weak growth of productivity – how much value is created in each hour worked – means that pay growth has lagged behind inflation and household budgets remain squeezed. Pay and productivity are linked and the CBI believes that now is the time to focus on productivity to help drive higher living standards in the future.

The CBI’s report, A better off Britain, sets out ways in which for businesses could rise to this challenge and ensure pay can rise sustainably in the future. Stronger business investment in things like machinery and equipment, computers, vehicles and buildings can help and was a strong driver of productivity growth in the years running up to the crisis.

There are encouraging signs that an improved economic outlook is giving businesses the confidence they need to raise their spending on these things.

For many services firms – for example in retail and wholesale, hospitality, health and social care, and professional or financial services — productivity growth is more about innovation in business organisation and investment in things like software, design, branding and advertising.


So while investment in technology helps, delivering real improvements in productivity depends on changing the way a business does things, engaging with staff and re-thinking how jobs are done.

The CBI is therefore calling on businesses to ensure that managers have the support and the skills they need to develop staff and look at the way that jobs are designed to make sure we are as competitive and productive as we can be.

And working with other companies and organisations can help encourage more innovation. Strong business leadership, more collaboration with customers and suppliers, and learning from what other businesses do well can help raise productivity in different types of companies.

Government also has a part to play. The policy environment influences many of the factors that determine how fast productivity grows over the long run – levels of competition, regulations, the skills system and incentives to encourage firms to invest and export.

And in A better off Britain, the CBI argues that the government could do more here to support productivity growth in firms, especially in small and medium-sized firms. This is about removing the barriers that can prevent the most productive firms from growing, by helping firms to borrow funds to invest in growing their business, or helping direct them to export support services like UKTI.

Read more What role can business play in building a better off Britain?  Business must have a positive vision that sets out how we can ensure everybody benefits from growth, says the CBI  How can employees be empowered to contribute to business success?  The Unipart Way is the key to productivity, says John Neill, Unipart  What role does business have in helping to raise living standards through work? More skills and opportunities essential for better pay, explains Catherine Ward, Interserve


[1] Populus opinion poll, October 2014. Available at:

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