Chancellor seeks to tackle Britain's productivity gap

THE CHANCELLOR of the Exchequer yesterday hinted that his next Budget could include fresh incentives to encourage more investment by industry after a damning report showing that British productivity lags that of the US by 40 per cent.

Launching an initiative to tackle the productivity gap at a Downing Street seminar, Gordon Brown indicated that incentives for capital investment, skills development programmes and increased support for entrepreneurs were all on the agenda.

Treasury and Department of Trade and Industry officials later said that a range of measures to build on the corporate tax reforms set out in the last Budget were under examination.

The initiative follows a report to the Government from the US management consultants McKinsey showing that as well as lagging far behind American productivity standards, Britain was also at least 20 per cent behind Germany.

The report identifies Britain's inferior level of capital investment as one of the causes of its poor record on labour productivity against competitor nations, including even the French, where industry is saddled with high social costs of employment.

Mr Brown and his officials strongly contested suggestions that introducing a national minimum wage would hamper the drive to improve competitiveness, pointing out that the US had had a minimum wage for many years.

But one of the authors of the report, Bill Lewis of the McKinsey Global Institute, pointed out that the US minimum wage was set at about half the level of those in Germany and France and affected few employers because wages had risen so strongly.

The McKinsey analysis shows that in some sectors, such as the car industry, the UK's labour productivity is half that of the Japanese and 20 per cent below the US. In the service sector, the productivity of the UK's hotel industry is half that of the US while in telecoms the gap is 45 per cent.

The seminar was attended by 20 leading UK businessmen, including Lord Simpson, managing director of GEC, John Browne, chief executive of BP, Sir Ian Prosser, chairman of Bass, and Terry Leahy, chief executive of Tesco. Mr Brown told them that to achieve the higher productivity on which growth, employment and living standards depended would require "a new national economic purpose".

Margaret Beckett, President of the Board of Trade, who co-hosted the seminar, said that the McKinsey study echoed the findings of her own competitiveness unit and pledged that the Government would have a role to play in encouraging investment and training and improving competition policy.

A series of 10 further seminars will take place around the country this year, covering sectors such as manufacturing, food retailing and software, while the Government intends to publish a competitiveness White Paper in the autumn.

According to McKinsey, the labour productivity gap with France and Germany is partly explained by the fact that these two countries have fewer people in employment working fewer hours.

Outlook, page 25

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

Day In a Page

Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there