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Spotlight on Productivity: by Stephen Nicol (Nicol Economics)

Businesses in Cumbria will be all too aware of the national debate about the UK’s poor productivity performance. The UK’s productivity levels have performed poorly over the last 10 to 15 years compared to previously and also compared to most other advanced economies[1].

Low productivity growth means our economy struggles to grow without increasing the number of workers or hours they work - both of which have other undesirable consequences.

There are many reasons for this phenomenon, with an extensive and ever expanding body of research. One strand of research suggests that the fall in productivity growth across the UK has been driven by a weakening performance, not in the very top performers (top 10%), but in the middle tier of businesses (i.e. the top half excluding the top 10%). Could that be your business?

This UK-level issue is, unfortunately, writ large in Cumbria. Over the last 10 years productivity levels have been falling relative to the national average. The amount of economic value created for every hour worked in Cumbria at £31 was 20% below the national average and 12% below the North West regional level in 2021[2].

Cumbria is also facing an especially tough labour supply and skills challenge right now, with our workforce shrinking.

Improving productivity is all the more important for any business in Cumbria seeking to expand, increase profitability and or just survive in the long term. Is that your business?

Previous research for the LEP has identified four main reasons for below average productivity levels within our economy’s sectors:

  • Low rates of innovation (in all senses) and take-up of new technology opportunities - especially across smaller and medium sized firms;
  • Market focus and competition - facing competition and engaging in exporting tends to raise productivity levels;
  • Proportion of staff employed with higher level skills (degree or higher level apprenticeship); and
  • Management capacity.

But let us not get too negative: Cumbria has some shining examples of highly innovative, productive and profitable businesses across many sectors, some of which have been supported by Cumbria LEP.

Recent announcements on Full Expensing rules for capital allowances in the Autumn Statement will help tax, cash flow and payback implications for many capital investments.

Can you get help?

Cumbria LEP has supported a programme for firms seeking to invest in innovation across Cumbria and the LEP will be delivering similar support through the Shared Prosperity Fund, with grants due to be awarded to businesses before Christmas. This is alongside work with specific sectors to develop innovative workstreams that will facilitate growth and increased productivity.

The LEP has also had a significant focus on addressing Cumbria’s skills and labour challenges with programmes such as Skills Bootcamps designed to upskill both the current workforce and get those that are not currently in employment back into work. The LEP will be launching a Leadership Programme for 18-35 year olds focused on developing Cumbria’s future leaders, given the importance of effective leadership and management in helping address the productivity puzzle.

If you are interested in improving your business productivity the Cumbria Accelerator can provide the necessary advice and support.

1. Measured by the value of economic value created per hour worked.
2. 2021 data which is the latest available.

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