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“Mind the Productivity Gap”

Image to show how with a little help businesses can overcome issues to grow.

Supporting businesses, the local economy and addressing the Productivity Gap:

It is not just the slowdown in UK productivity growth (Productivity Puzzle) that attracts considerable political and economic attention, but also what is sometimes referred to as the ‘Productivity Gap’.

The ‘Productivity Gap’ refers to the longstanding differences in productivity across different regions of the UK economy. London and the Southeast are regions of the UK with above average productivity. Other regions in the Midlands and the North are not growing as well.

The UK has some of the largest regional productivity disparities when compared with other advanced economies. This “regional economic market failure“, is thought to lead to a less optimal level of GDP and economic growth, as well as, impacting on living standards at a local, regional, and national levels.

What causes lower economic growth?

Since the financial crisis of the noughties, low levels of UK economic growth has have been said to be driven by four main factors:

  • Employment growth despite being positive, seems to have been to be driven by lower-skilled workers, with lower wages. Other growth has been through the change to part-time work, temporary contracts, and more self-employment. To boost productivity, the UK needs to see an increase in better paid, more skilled roles outside London and the Southeast. Source Productivity 2022
  • Investment decline: The UK’s investment as a share of GDP fell from 33 percent in 2007 to 17.8% percent in June 2023. This reflects lower private spending on capital goods, research and development, infrastructure, and innovation. Less investment means less growth.
  • Uneven digitisation: The UK has fallen behind in adopting digital technologies that can enhance productivity. Some say this is due to barriers to access the right information, the right finance, skilled workers, and regulatory constraints.
  • Financial sector issues: Stringent financial controls and cautious lending to new businesses have impacted UK business growth.

Addressing the productivity puzzle and productivity gap at regional and national levels is crucial for the UK to achieve higher living standards in all areas. The urgency of this is never more so than in areas of outside of London and the Southeast.

What does Examplas do?

Exemplas, working in partnership with national and local government, delivers business support programmes that help to drive improvements in productivity and economic growth in regions outside of London and the Southeast, working closely with local partners and stakeholders. Our programmes include:

  • A unique productivity offering in West Yorkshire funded by West Yorkshire Combined Authority deploying a unique research-developed productivity diagnostic tool which enables firms to understand the drivers of productivity in their businesses. Then, through advisory support from Exemplas experts, they develop robust, measurable Productivity Improvement Plans.
  • A growth offering, again driven by our team of experts. It is based on a research-developed programme, that has the stringent validation from our university partner Leeds Beckett. Exemplas help businesses to plan and execute growth and innovation plans. This programme is funded by the Shared Prosperity Fund in West Yorkshire.
  • A business innovation offer –Innovate UK EDGE, delivered across the East of England, West Midlands and East Midlands which helps fast-growing, and scale up businesses to commercialise and internationalise their businesses and become investment ready, as a means to drive local growth.

Source Productivity 2022