New ‘productivity institute’ will tackle poor management practices

Government says £42m funding will ‘turbocharge’ lagging UK productivity levels

The government has committed £42.2m to improving UK productivity through research, including £30m for a new ‘productivity institute’, which it says will tackle barriers to productivity including poor management practices. 

The institute, announced by business secretary Andrea Leadsom, will undertake analysis of productivity imbalances between sectors and regions, apply research in real-life environments to improve productivity in businesses and act as a ‘convening hub’ for wider research.

The remaining funding will be committed to calls for research, where academics from any institution can apply to conduct projects.

The Department for Business, Energy and Industrial Strategy said the funding would help “close the productivity gap between the UK and major world economies”.

Jon Boys, labour market economist at the CIPD, welcomed the large-scale investment into productivity. “When people think about productivity, they think about big infrastructure projects like HS2, or housing. But there’s increasingly a focus on management practice” he said.

But Boys also highlighted that management practice was something the HR profession in particular could address to effect change. “This is well within the control of the employer,” he said.

“Instead of sitting back and seeing [lagging productivity] as a macroeconomic challenge that the country faces, it’s actually something that's within your power to [change], especially in small businesses.

“The UK has got poorer management practice scores compared to peer nations we like to benchmark ourselves against.”

Professor Carol Atkinson, associate dean of research at Manchester Metropolitan University, said the investment into productivity through technology and working practices would be “money well spent”.

Speaking to People Management, Atkinson said management practices were important to solving the UK’s “productivity puzzle”, adding that employers could improve productivity through better communication with staff, training and performance appraisals.

“Staff who know how to do their job properly [and] who are satisfied with the environment they work in tend to be more committed to that organisation, and then to work harder or more effectively, so that improves your productivity,” she said.

The latest official statistics showed UK labour productivity – a measure of the amount of output per worker per hour – fell at its fastest pace in five years in the second quarter of 2019. UK business has been consistently less productive than its European neighbours in recent years, according to official measures, even as the country has performed relatively strongly in economic terms.

The investment forms part of an £88m commitment from government, which also includes £45.7m to invest in technology that will – among other areas – improve the country’s weather forecasting abilities.

The funding has been allocated from the government’s Strategic Priorities Fund, which invests in research and development.