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MANUFACTURERS RISK GETTING STUCK IN ‘PRODUCTIVITY SLOW LANE’

·         Nearly three fifths of manufacturers are worried about a lack of productivity in the UK economy, but only around a quarter believe it is an issue for their own business

·         Two thirds of manufacturers already have a plan in place to boost their productivity

·         But six in ten say a skills shortage is the main barrier to faster productivity growth

·         And half say they need to do more to innovate

Manufacturers are failing to take crucial steps to boost their productivity, according to a new report from Lloyds Banking Group and the Manufacturing Technologies Association.

The Understanding the Puzzle report canvasses the views of more than 1,500 businesses across the UK, highlighting a widespread concern about productivity levels in the UK economy and echoing worries that have been raised by Government and industry bodies.

It raises an urgent need for investment in order to prevent UK productivity levels falling far behind other countries.

The report found nearly three fifths (59 per cent) of manufacturers recognise productivity is an issue for the UK economy, but as few as a quarter (28 per cent) believe it is a problem for their own businesses.

While two thirds (66 per cent) say they have a plan in place to improve their productivity, nearly a fifth (19 per cent) do not have a plan yet, and almost a sixth (15 per cent) say they never will.

Lack of investment

More than half (54 per cent) of manufacturers recognised that their own lack of investment was the main problem, and more than two thirds (68 per cent) intend to invest in their business in the next year – and of those, only three in ten (31 per cent) are increasing their spend, while more than a third (35 per cent) are freezing it and a tenth (11 per cent) are making cuts.

Among those firms that are planning investment, only a third (32 per cent) plan to do so with the specific goal of improving productivity.

The main priority for investment to boost productivity for manufacturers is production machinery (44 per cent), with skills and training (37 per cent), automation (30 per cent) and robotics (12 per cent) also important.

Of those reigning in investment, nearly half (45 per cent) cite economic uncertainty; almost a sixth (15 per cent) feel there is a lack of available skilled labour; and one in ten say they are simply unsure of the benefits any investment would provide.

Obstacles to productivity growth

Manufacturers cited a range of obstacles hindering their productivity growth, led by a shortage of skilled labour, cited by three fifths, and the quality of management in their businesses (54 per cent).

More than half said that concerns over regulation (51 per cent) were an issue, while half cited inadequate R&D and nearly two fifths (37 per cent) mentioned restrictive labour practices.

Innovation

The study also examines the issue of innovation, which is widely seen as key to increasing productivity.

Half of manufacturers say a lack of innovation is an obstacle to productivity for them and that innovation is being stifled by factors including a lack of ideas (26 per cent); their firm’s culture (20 per cent); their business’ attitude to risk (19 per cent) and a lack of skills (16 per cent).

Dave Atkinson, head of manufacturing, Lloyds Bank Commercial Banking, said: “Productivity is one of the defining economic issues of our time. The UK’s low level of productivity compared to its G7 peers remains an unsolved puzzle, and it is crucial that we seek to understand how businesses view the problem in order that we can try to fix it.

“Manufacturers do recognise that productivity is an issue for the wider economy, but this research indicates they are less convinced that it is a problem within their own businesses. While many firms do have a plan in place to boost productivity, most are not investing enough to overcome the barriers to productivity growth.

“It is hard to overstate the importance of productivity growth in securing the economic prosperity of our nation – and we must do everything possible to avoid the risk of getting stuck in the productivity slow lane. It’s encouraging to see investment in new technology and automation as a priority for manufacturers, as there is no doubt in the huge efficiency and productivity benefits this can bring for firms.

“That is why - through our Helping Britain Prosper Plan - we are working hard to help our customers grow at home and overseas.”

James Selka, CEO of the Manufacturing Technologies Association: “Getting investment right is one of the biggest challenges manufacturers face. By investing in technology, especially new technology, manufacturers can grow their productivity and give their businesses an edge.

“We - the MTA, which represents the technology creators and suppliers; Lloyds Banking Group, which funds so much of UK manufacturing; and Government, which helps set the economic landscape - need to help them to do that.”