LONDON: Britain has been issued a fresh warning over its poor record in innovation and embracing technological change, with new estimates showing a key measure of productivity fell in 2014 for the third year in a row.
The data will raise concerns that the financial crisis has permanently damaged one of the main sources of long-term economic growth. While Britain expanded by 2.8 per cent last year, the fastest of any major advanced economy, this was because of an increase in investment and in the number of hours worked, not because of an improvement in overall efficiency.
“UK businesses have made good progress on job creation but productivity has not yet followed suit,” said Neil Carberry, director for employment and skills at the CBI. “The focus now must be on spurring businesses to innovate and raise their performance.”
Britain’s poor productivity performance poses taxing questions for the political parties ahead of the May 7 general election. Productivity growth is a key determinant of wages and living standards, as well as of the health of public finances.
Total factor productivity (TFP) — a measure of improvements in technology and in the efficiency of management — fell by 0.1 per cent in 2014, after sliding by 1.5 per cent in 2012 and 0.4 per cent in 2013, the Conference Board think-tank has shown. It is the first time since at least 1992 this indicator of efficiency has fallen for three consecutive years.
Britain is not the only country to have experienced a TFP decrease in 2014. France and Germany saw even larger declines, with this measure of efficiency falling by 0.6 per cent and 0.3 per cent, respectively, according to the Conference Board.
