The report says: "Our disappointing performance in GDP per head is primarily due to a shortfall in our productivity performance."
The US, where hours worked are also long, has something to show for it with GDP per worker 33 per cent ahead of the UK. In France GDP per worker is only a little higher than the UK's but the French put in fewer hours, so output per hour worked is 26 per cent higher than in the UK.
Stephen Byers, the Secretary of State for Trade and Industry, said: "We have the long hours culture but we are not getting the rewards for it."
The national performance audit, which will become a regular annual assessment, shows that lack of an entrepreneurial culture, poor basic skills, low levels of innovation and a lack of university spin-offs are some of Britain's biggest weaknesses. The strengths include improved economic stability, a flexible labour market and openness to international trade and investment.
On Thursday, the anniversary of last year's Competitiveness White Paper, the Department of Trade and Industry will announce what progress it has made in implementing the White Paper's recommendations.
Mr Byers said improving competitiveness would be a long-term process. Some measures taken now would not have an impact for many years. He said: "There are some messages here which are quite difficult for the Government." But Mr Byers added: "I hope that in some areas it will act as a wake- up call to business."
The report sets out a wide range of indicators and grades the UK's performance in each area. In innovation, for example, the score for joint research by university and industry is high, but attitudes to entrepreneurship are disappointing and manufacturing spending on research and development very weak.
Statistics show that the UK has a lower proportion of people who believe friends or family members would like to start a business, or who would approve if their child started a business, than either the US or Continental Europe. The proportion of adults trying to start a business in 1997 was lower than the US and on a par with Norway and Sweden.
Between 1990 and 1993 the UK had a similar proportion of high-growth companies as other European countries, and all lagged well behind the US.
"One of the real challenges is to create a climate where people see starting a business as a viable option ... If you try and fail we come down on you really hard," Mr Byers said.
Bankruptcy law would need eventually to be updated so that the penalties for new business failure were not so harsh, he said. In addition, the Government treated all companies in the same way no matter what their size. The current review of company law was looking at this issue.Reuse content