The key to addressing the UK’s productivity problem is not to focus on underperforming businesses, but to help high-performing firms to increase output even further – especially in cities outside the Greater South East.
That is according to a report published today by the think tank Centre for Cities, which examines the idea that a ‘long tail’ of unproductive firms are the cause of sluggish UK productivity – and that boosting their performance will be vital in addressing this problem.
This idea has been championed by economists at the Bank of England and OECD, and yesterday the Government launched a new Business Productivity Review to help unproductive firms step up their performance, which it says could unlock £100 billion for the UK’s economy.
However, the Centre for Cities analysis offers important new insights into the UK’s productivity problem, which suggest that the focus for policymakers should be less on underperforming firms – and more on improving further the performance of already highly-productive businesses in cities across the UK:
Andrew Carter, Chief Executive of Centre for Cities said:
“The biggest factor dragging down UK productivity is not underperforming businesses – it’s the fact that cities outside the Greater South East are home to too few highly productive firms which drive national economic growth.
“The priority for policymakers should be to help cities tackle the obstacles which prevent them from supporting more of these businesses. In many instances, that will mean a much bigger focus on addressing skills-gaps in their labour markets or improving infrastructure to create a better environment for these kinds of businesses to thrive in.
“This will ultimately have a bigger impact in pushing up national productivity – and improving living standards for people across the UK – than efforts to help unproductive firms increase output. It should be a key consideration for the Government and for cities as they finalise their local industrial strategies in the coming months.”
For more information, or to arrange an interview, please contact Brian Semple, Head of Communications at Centre for Cities, at email@example.com or 0207 803 4316 / 07595 439 638.
|NOTES TO EDITORS
All data is based on analysis of the Office for National Statistics’ Annual Business Survey (2015)
(1) The top performing businesses are here defined as the top 10% of firms for productivity in the UK.
About Centre for Cities
Centre for Cities is a research and policy institute, dedicated to improving the economic success of UK cities. We are a charity that works with cities, business and Whitehall to develop and implement policy that supports the performance of urban economies. We do this through impartial research and knowledge exchange. For more information, please visit centreforcities.org/
Head of Communications