Don’t expect white van drivers and hairdressers to solve the UK’s productivity woes

A new Centre for Cities report suggests that while there is a long tail of underperforming firms across the country, they cannot be expected to deliver the productivity growth needed to transform the UK’s economic prospects.

That’s because the UK’s least productive firms are almost without exception those that serve only local markets, such as hairdressers, cafés and handymen. These kinds of businesses have seen little or no growth in productivity for decades and are unlikely to do so anytime soon, primarily because of their limited capacity to benefit from technological advances.

For example, the work of a waiter or hairdresser has changed little in the past 50 years, despite the dramatic developments in workplace technology that this period has seen. A waiter can still only serve so many tables, and a hairdresser can only cut so many people’s hair.

Instead, the key to addressing the UK’s problem is to help already high-performing businesses do even better. That means focusing on firms which export across the country and globe, particularly in sectors such as ICT, manufacturing and pharmaceuticals.

Read more in the Times Red Box.