The Productivity Problem

Britain’s productivity performance, measured by output per worker employed, has proved little short of appalling over the past twenty years, as our relative post-war economic decline has worsened. In the decade up to 1973 the average output per worker in British manufacturing industry rose at an annual rate of 3.5 per cent, but while our manufacturing output per worker rose by just over three quarters between 1955 and 1973 the average level of productivity in the member states of the European Economic Community increased by as much as one and a half times. For the rest of the seventies — with short, exceptional bursts in 1973 and 1979 — the country’s output per head spluttered along at a disastrously low rate, in contrast to what was happening on the continent of Western Europe. Lack of competitiveness in the UK (shown in Figure 3.1) has become a major obstacle to the creation of any sustained economic growth, though it recovered by 11 per cent between January 1981 and January 1982. Figure 3.1 Loss of UK competitiveness — UK unit labour costs in manufacturing relative to main competitors Note: Arise indicates a loss of Uk competitiveness source ‘The Will To Win’, CBI, March 1981, p. 12.