EEF: Government must address failed productivity strategy

The manufacturers’ organisation is calling on Downing Street to fast track the creation of the promised Industrial Strategy Council and act upon the conclusions of the EEF’s recent report on productivity, Unpacking the Puzzle.

It is also demanding four measures be delivered before Parliament’s summer recess that aim to boost project management, provide devolved strategies for the regions, publication of Government plans for export promotion, and details of promised action on “the UK’s long tail of less productive firms”.

EEF chief economist at EEF Lee Hopley said: “We’ve known about the productivity problem for some time with various attempts made to try and fix it across the whole economy.

“Productivity growth matters for wages and international competitiveness yet ten years on from the start of the financial crisis these attempts have not delivered a major shift and we need to tackle the challenge in a different way.”

Ten years on from the start of the financial crisis these attempts have not delivered a major shift and we need to tackle the challenge in a different way

Lee Hopley, chief economist, EEF

The productivity report’s key manufacturing sector findings are

• UK manufacturing productivity grew 4.7% between 2000 and 2007 but afterwards was less than 1% a year
• Before the 2008 financial crisis all manufacturing sectors contributed to productivity growth
• Since then there has been significant divergence
• Since 1995 transport equipment and chemicals growth have outperformed internationally
• Pharmaceuticals growth went sharply into reverse after 2008
• Food and drink, generally regarded as a weak performer in the UK, outperformed internationally over the past decade

Said Hopley: “Manufacturing offers a good area to get gains on productivity growth. The Industrial Strategy Council should now be created urgently and put to task to identify how the overall strategy can improve productivity in those industrial sectors where it has lagged.”

Overall, manufacturing outperformed whole economy and services productivity growth previously and, in the run up to the financial crisis, beat the manufacturing productivity growth of Italy, Spain and Germany.

Yet, performance has varied in manufacturing sub-sectors since 2008 warn the report authors. They conclude that sectors with a higher share of larger firms tend to outperform internationally because they can exploit economies of scale, vertical integration opportunities and with it, higher levels of productivity.

However, they add that capital investment alone will not guarantee improvement: Italy’s investment in capital equipment outstrips Germany’s but the latter is more productive.

NEWS UPDATE: EEF CEO Stephen Phipson has had talks with his organisation’s powerful US counterpart in order to boost ties post-Brexit.

The National Association for Manufacturers (NAM) CEO Jay Simmons was one of several key American figures with whom the EEF chief held discussions, who also included the trade adviser to the outgoing Speaker to the US Congress, Paul Ryan.

Said Phipson: “The ties between the UK and United States go back a long way and we have significant political, economic and trade connections. Relations with the US are vital and its market is the second most important for UK goods. In a post-Brexit world it is likely to assume ever greater importance as part of our efforts to boost global trade.”