HISTORIC PRESS RELEASE : Stephen Byers highlights depth of Britain´s productivity gap [September 1998]

The press release issued by HM Treasury on 17 September 1998.

Up to date independent analysis showing Britain’s low levels of productivity was highlighted today by Chief Secretary Stephen Byers. Speaking to a New Statesman conference on the “Radical Century” he said:

“Tackling Britain’s productivity gap is an important national challenge. In meeting this challenge, we are confronting one of the most fundamental longstanding weaknesses of the British economy.

“The Government’s productivity agenda is a key part of modernising our economy. It is not about working harder but about working better.

“The present productivity gap means that our prosperity and living standards are being held back. Increased productivity is fundamental to the improvement of our living standards in the UK and our ability to build a decent and fair society for all.”

The figures from independent management consultants McKinsey confirm that:

•  Britain has a productivity gap of 40% with the USA and 20% with both Germany and France
• the problem effects both manufacturing and services.  Britain’s productivity is 50% behind Japan in car manufacturing but also 50% behind the USA in industries like hotels and telecoms.
• there is very low physical investment – UK capital intensity is 20% behind the USA.
• over the last international economic cycle for every 100 Pounds per worker invested by the UK the USA invested 140 Pounds  and France 150 Pounds.