As concerns over UK productivity linger on, think tank the Institute for Public Policy Research (IPPR) has suggested one way to solve the so-called "productivity puzzle" is for the government to focus on low-skill sectors such as retail and service.
The IPPR’s chief economist Tony Dolphin said despite the government targeting support at highly skilled industries, it is staff in lower-skilled industries whose performance may be critical to Britain’s economic recovery.
Our analysis of the UK’s productivity performance shows that an unfavourable shift in the structure of the workforce towards relatively low-productivity sectors has been a significant factor holding back aggregate productivity in the last three years.
The IPPR report, published ahead of unemployment figures on Wednesday, showed productivity fell 1.15 per cent between 2012 and the end of 2014.
During that time period, the economy also grew at a “reasonable pace but productivity stalled – a combination that is unprecedented since the Second World War”.
“There is therefore plenty of scope for the UK to make productivity gains, although closing the gap between it and other European countries will take many years,” the report said.
The IPPR suggested there needs to be a shift in government policy, including expanding government support to more sectors of the economy, not just high-tech industries.
There are currently nine catapult centres covering areas such as high-value manufacturing, digital, precision medicine and energy systems, but none for the domestic, service sectors – such as hotels, restaurants, retail and social care - where millions of people are employed.