Can Covid help solve Britain’s productivity crisis?

As 2020 accelerated the shift to flexible and home-based working and more investment in new technology ,The Productivity Institute’s Managing Director Professor Bart van Ark joined Andy Start, Capita’s CEO of Government Services and Joanne Roney, Chief Executive of Manchester City Council at Tortoise’s The Future of Work Summit to discuss whether Covid could help solve Britain’s productivity crisis.

The regional divide

Despite Covid, the gap in productivity between the UK and the rest of the advanced economy has not changed. Professor Bart van Ark said a chronic lack of investment in skills and education, knowledge and ideas, organisational changes and the way people worked in the regions were the main reasons.

Also the regional disparities in northern and southern cities were a specific UK problem that needed addressing to help solve the productivity crisis.

Bart believes we need to take a broader perspective to improve productivity. A narrow focus on growth will constrain us, thus under leveraging our opportunities. We need to take a broader perspective so that the focus is not just on measuring GDP and to look at other ways of measuring the value of business innovation.

The unexpected rise in productivity

Despite this crisis, the pandemic continued to provide an unexpected boost to UK’s productivity prospects. Andy Start said accelerated digital technology caused by Covid had changed attitudes, with an increase in public and private sector technology allowing us to see productivity growth in places where we couldn’t before.

A lot of these technologies were around before – for example, video conferencing – but Covid has changed employer attitudes in a very short period of time. Although online conferences, webinars and digital meetings were not the always ideal, their take up would not have happened at such a great pace without the pandemic.

According to Office for National Statistics data for the first quarter of 2021, UK investment in machinery and in information and communication technology rose 3.2% compared with the last quarter of 2019 — the last three-month period before the pandemic hit Britain.

However Joanne Roney, Chief Executive of Manchester City Council looks at productivity through prosperity, inequality and healthcare in her area – not through innovation – and Covid has worsened this.

The pandemic has caused a great impact on young people and hospitality and could have a long term effects on businesses. In the job sector, Joanna said there was a huge acceleration in digital jobs and growth so the government now needed to ensure prospective employees had the right skills for these jobs to enhance their opportunities and living standards in towns and cities.

Bart suggested that by improving access to resources that create productivity growth, such as childcare, could help bring more women into the workforce and better living standards and improved skillsets could be achieved in regions across the UK.

Joanna agreed and added public sector reform also could support local businesses by creating flexible working patterns so women could return to employment after having children. More devolution and flexibility to redesign systems locally could also mean less people claiming benefits or universal credit.

Bart said productive companies created better jobs and better living standards which is why it was so important to address productivity when discussing the future of work.

In the short term, that meant automation which could affect jobs, but in the long term it would lead to jobs that paid well which would in turn provide people with better living standards. Therefore the relationship between productivity and better jobs is a positive one. It should be explored further, not just when making improvements in the labour market, but in improving businesses everywhere which will in turn benefit the UK economy.

This blog is based on the Tortoise Future of Work Summit. Watch the full think-in on Tortoise’s YouTube channel below: