By Tony Russell, Chief Growth Officer at Proteus

As productivity in the G7 continues to stride ahead, Brexit and the Covid-19 pandemic has knocked any progress the UK was making, leaving the country significantly lagging its peers. 

The decade-long productivity puzzle is proving hard to shift. The UK has found it difficult to make any real improvements in its productivity numbers since the global financial crisis in 2008. 

In 2016, prior to the Brexit vote, the gap when compared with G7 peers had started to narrow and was around 16.6% below the average. By the time Covid-19 hit, the gap stood at 13% below the G7 average, and while it continued to lag the likes of the US, France and Germany, the UK was on par with Italy and ahead of Canada and Japan. 

In October last year, Bank of England chief economist Huw Pill said the UK had faced “three major waves of uncertainty”, namely the global financial crisis, Brexit and the Covid-19 pandemic. These waves, he said, have made companies cautious when it comes to investment, innovation and research and development. 

Sustained growth

The latest statistics from the Office of National Statistics for the third quarter of 2021 showed a 1.4% fall in output per hour, painting a very uncertain future for businesses. 

The productivity puzzle was also the focus of Chancellor Rishi Sunak in his October Budget, moving away from the pandemic requirement to protect businesses and jobs and focusing instead on broad-based productivity growth to lay the foundations for sustained growth.

The Budget included announcements of significant investment in skills, infrastructure and better access to finance, all of which are vital to the UK’s economic recovery. This will, in turn, boost productivity and the opportunities for UK businesses. 

However, there is no denying that the past two years have been difficult for businesses – most were forced to close their doors for months on end as the government enforced a national lockdown. 

Even now, as we emerge from the pandemic, these same businesses are facing problems of rising supply chain costs driven by the energy price hike, staff shortages, and high inflation and its impact on interest rates. And all of this is before the government’s planned rise in National Insurance payments comes into play in April. 

Halting the great resignation

A UK PLC rethink is vital. Last year saw large-scale sector-side departures and the emergence of the ‘great resignation’. 

While redundancy figures remain low in the UK, employees are resigning at a rate not seen since 2009 with some opting to leave the labour market entirely, many citing pandemic burnout as the driving factor. 

This isn’t unique to the UK. In the US, the latest data shows that 4.5million people quit their jobs in November 2021. 

And this burnout isn’t solely the fault of businesses – two years of chronic health anxiety and financial fears have taken their toll on mental health. With wallets being squeezed by inflation and the spiralling cost of living, its no surprise that employees are looking for a change. 

This turnover of staff comes at a considerable cost to businesses in the form of recruitment and overtime to cover the empty position in the short term. The great resignation has only served to highlight the importance of maintaining a happy workforce, whether that be through improved pay or better working conditions. 

Staff have the upper hand

The Covid-19 pandemic, which saw many employees setting up offices in their kitchens and dining room tables, made it clear to both staff and businesses that flexible working was possible, giving workers the upper hand when negotiating terms of existing, and new roles. 

For some business, the option to offer working from home simply isn’t possible, but there are other options. Atom Bank is case in point. It recently made the decision to implement a four-day working week both boosted the morale of existing employees and saw a 500% increase in job applications – proof that challenging the status quo and engaging the workforce pays dividends in productivity. 

Following on from this success, three more firms have confirmed they are trialling a four-day working week with no change to employee pay terms. Yo Telecom, Hutch and MBL Seminars have each announced that they are looking at the change in working as a viable option. 

Better salaries, the opportunity to earn a bonus or additional benefits such as health and dental care can also boost the morale of an existing workforce, as well as entice new recruits to one business over another. It is vital, however, that whatever benefits a business offers is engrained in its culture, and not a stop gap to improve productivity and staff turnover. 

The time has come for businesses to stop using flexible working, skills gaps and increased retention strategies as a way of firefighting, but as an essential tool in the day-to-day corporate operations.