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December 8, 2016updated 13 Jan 2017 11:56am

How can technology solve the British Productivity Puzzle?

A report suggests technology promises productivity gains of up to 20 percent to the individual business.

By Alexander Sword

A new report from Vodafone and the LSE suggests that businesses could up their productivity by 20 percent through some relatively easy fixes – but will this be enough to fix stagnating productivity across the UK?

Sluggish productivity in the UK is a widely acknowledged problem. According to the Office of National Statistics (ONS), worker output per hour in the UK has only just reached its pre-crisis level.

Extrapolating from performance prior to the 2008 downturn, productivity is 17 percent lower than it should be if pre-crisis trends had continued. UK productivity is significantly lower than the average across the G7 group of industrialised economies, far behind that of France, Germany and the US.

Chancellor of the Exchequer Philip Hammond’s Autumn Statement in November pledged to tackle this productivity problem with a £23bn fund for investment in housing, transport and innovation.

One of the areas that Hammond targeted for investment was connectivity. He announced a £1bn investment in broadband in order to spread fibre networks and 5G.

But could technology play more of a role in the plan to tackle the productivity ‘puzzle’, as the Bank of England termed it?

Dr Alexander Grous, who conducted the LSE study, has a nuanced view of how technology can be used.

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On the one hand, for the individual business, Grous says that technology could be transformational. The report says that most managers are not sufficiently aware of available technology options to produce productivity benefits.

Among those who are aware, two-thirds don’t know who to talk to for assistance.

As Grous says, however, “[businesses] don’t need to hire consultants, there are very simply things they can do to address this.

“It isn’t rocket science but you need to know where to start.”

This use of technology and flexible working would have to come alongside a general improvement management practices.

“The key to maximising the power of ICT is in how it is deployed,” the report says. “ICT adopted intensively alongside best management practices can achieve up to a 20 percent uplift in productivity; alongside poor practices that yield only a two percent rise.”

This may look promising. However, where this argument possibly falls down is on the macro level. Grous notes that there are all sorts of factors influencing the productivity in a country that are completely unrelated to technology.

For example, in the US, it is far easier than in the UK to sack workers for whatever reason, whether due to redundancy or under-performance.

Grous also notes that UK businesses are currently ‘hoarding’ workers due to the low cost of labour, which may be having an impact.

From this perspective, it may be unrealistic to expect the Government to transform productivity. However, Grous praises the renewed investment role undertaken by the Government under the new Theresa May-led regime.

He cites the Productivity Fund as a positive step.

“Government needed to invest more and it is doing so. The Government is doing its bit.

“Ultimately, survival or failure depends on the firm.”

So what does the report tell us about technology and productivity? At the level of the individual business, it could be a key tool in the mix of boosting workforce output.

Whether the government could make Britain more productive through technology is currently unclear, however.

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