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IPPR welcomes Green Report on UK productivity levels

IPPR strongly welcomes the Government’s starting point on industrial strategy, as outlined in its Green Paper on industrial strategy, due to be published today. This will be a much more wide-ranging document than many have anticipated.

The document has been personally directed by Business Secretary of State, Greg Clark, and reflects his and Theresa May’s acceptance that, contrary to the impression the Government has given elsewhere that the British economy is doing rather well, it actually has serious underlying problems.

In particular, the Green Paper will start from two far-reaching facts about the British economy: Our low rate of productivity relative to the UK’s major competitors, and the huge disparity in productivity across Britain’s nations and regions. It will point out that only if productivity is raised everywhere can it be raised in the UK as a whole. And only if productivity is raised can wages be increased. So the strategy’s goal of raising productivity throughout the UK is crucial to the Government’s attempt to help those ‘left behind’ or ‘just about managing’

IPPR’s report on industrial strategy, published November 2016, argued that industrial strategy:

  • Should not be just about galvanising R&D and brand new innovation – though this is certainly important. It must be about stimulating the much more widespread adoption of new technologies in all businesses.
  • Is also not just about manufacturing: It must be about service sectors too, which are responsible for 84% of all employment and where productivity is particularly low.
  • Is not just about high-tech companies in the UK’s golden triangle between London, Cambridge and Oxford, but has to happen in every region and nation of the country.

The Government looks set to agree with this analysis.

IPPR’s Commission on Economic Justice is currently examining how to design and deliver an effective industrial strategy and will report on this in the spring.

Michael Jacobs, director of the Commission on Economic Justice, said, “We welcome the Government’s wide-ranging approach. It is a long-overdue recognition that economic wealth is produced by the private and public sectors working together, not government ‘getting out of the way’ as previous Tory administrations have believed. Industrial strategy is the hallmark of the most successful economies in the world, such as Germany, Japan, South Korea, Sweden. Industrial strategy is vital to strengthen the domestic economy as we go through Brexit.”

Catherine Colebrook, IPPR’s chief economist, said, “IPPR strongly supports the Government’s plans for ‘place-based’ as well as sectoral approaches to industrial strategy. But it’s vital that these are properly resourced. The Chancellor has to provide enough money and powers to regional institutions. And any ‘deals’ the Government does must be properly transparent, as the agreement which kept Nissan in Britain in the autumn was not. They cannot just favour the best business lobbyists, but must represent a real compact of mutual obligations between public and private sectors.

“The government has already acknowledged that it needs to recruit overseas negotiators to do new trade deals; with so little experience in this field in the civil service, it could usefully employ some outside experts to help with industrial strategy too.”

Jacobs added, "A good test of the government’s seriousness in delivering industrial strategy is whether it goes ahead with the sell-off of the Green Investment Bank to an overseas asset-stripping bank, Macquarie. The GIB is a vital institution to help deliver low-carbon infrastructure: its privatisation should be stopped now before it is too late.” 

The IPPR Commission on Economic Justice is a two-year programme to examine the challenges facing the UK economy and make practical recommendations for its reform. Aiming at achieving a fairer, more broadly-based and more sustainable form of national prosperity, the Commission comprises 22 leading figures drawn from across civil society, business, finance, trade unions, and academia. Members include Justin Welby, Archbishop of Canterbury; Frances O’Grady, general secretary of the Trades Union Congress; Sir Charlie Mayfield, chairman of the John Lewis Partnership; Juergen Maier, Chief Executive of Siemens Plc; and Sara Bryson, Community Organiser at Citizens UK.

Clare McNeil, IPPR associate director for Work and Families, said, "The Prime Minister is right to argue that enabling everyone to develop the skills they need is crucial as we look to a post-Brexit future. However, if the government is serious about improving productivity it will not be enough to boost skill levels alone - more will need to be done to improve the investment in and use of skills by employers. 

"The past decade has seen significant improvements in the skills levels of the population, but over the same period, productivity has stagnated, growing by just 1%, pay has stalled, and one in five employees are still stuck in low-paid work. Too few employers are making the best use of their employees skills to improve companies' performance.

"Two-thirds of the workforce of 2030 have already left full time education, so the workplace and opportunities for lifetime learning are key. It is vital that as part of its industrial strategy the government introduces reforms that will both encourage employers to invest in their workforce, and support them to make better use of their skills as part of a high-productivity competitive strategy."

Peter Cheese, chief executive of the CIPD, said, “The CIPD supports the Government’s aspiration of cultivating world-leading sectors, however more clarity is needed on the ‘sector-deals’ the Government is hoping to help create and what type of support would be available to businesses under these.

“Once again the strategy looks to expand the provision of STEM skills in the UK, but fails to recognise that one of the obstacles to addressing this is that too many existing STEM graduates don’t go into the occupations or industries that demand these sort of qualifications. Until we address this problem, as well as do more to identify the core skills that make STEM subjects so valuable, additional investment in STEM risks being wasted.

“More broadly on skills, we welcome the increase in investment in technical education, but we question whether adding another layer of complexity to the education system by creating new institutes of technology is the best way of doing this. Re-focusing part of the existing Higher Education system to help develop technical skills would make more sense, particularly when employment outcomes for many graduates in subjects such as social sciences, arts and humanities are deteriorating.

“The strategy also overlooks the need for significant additional investment in lifelong learning. Provision for adult learning (Age 19+) measured by achievements has been cut by 25 per cent since 2011 and today’s announcement does nothing to reverse this decline. Greater investment in lifelong learning is crucial to allow workers at different stages of their careers to up-skill or re-skill in response to automation and advances in technology, especially as people will be working for longer.

“The future of work is rapidly changing. If this is to be a truly modern industrial strategy the Government must focus more attention on how people can develop transferrable or new skills that will help them to adapt and flourish and secure the UK’s status as a true talent hub.”

Chief executive of the Edge Foundation, Alice Barnard, said, "While Edge welcomes the Government’s ambitions for technical education, we fear that unless these principles are applied earlier in the curriculum, this investment will be wasted. We hope this direction towards a parity of status between academic and technical education will be reflected in the review of the EBacc. The current proposal is a narrow academic curriculum which inevitably fails to address the needs of employers in a post-Brexit 21st century economy. 

"If we are to create the talent pipeline which new industries and technology demand, it is vital we offer all young people the opportunity to study practical and technical subjects from aged 14, so they are developing the project management and problem-solving skills, the capacity for team work and the resilience which employers are crying out for.

"Young people’s aspirations and futures are formed in the classroom, so high quality careers guidance and employer engagement are critical to help students make informed choices about career options and the best education pathway to help them fulfil their potential, whether that’s via professional qualifications, an apprenticeship or university."

Andrew Gardner, senior divisional director at Reed Technology, commented, “The Government is right to outline plans for improving skills across the UK workforce. We know that skill sets are evolving and people with digital skills who can create and develop new technology within all sectors, manufacturing included, are in great demand. In fact, our recent  Salary Guides research found that 31 per cent of workers would move job to have more opportunities to learn and develop their skills – this proves that people know the value of up-skilling. Alongside this, almost half (47 per cent) of those in management, and 54 per cent in leadership positions, now recognise they have discernible skills gaps within their organisation.
“In 2017 employees with these skills will be in demand, and especially those with a background in STEM subjects – so it is fitting the government is highlighting these areas now. However, the manner in which it seeks to address, support and progress capability in these areas will be crucial. Not just to the success of the industrial strategy, but also the success of Britain as it looks to thrive outside of the EU.” 

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