Manufacturers call for the government to invest in the sector to escape the productivity puzzle

 
Billy Bambrough
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The UK's productivity puzzle has proven to be difficult to crack (Source: Getty)

Britain’s manufacturers are calling on the government to do more to balance the economy in order to solve the so-called productivity puzzle that has baffled economists since the financial crisis.

According a survey from the manufacturers organisation EEF, UK manufacturers have managed to escape the productivity puzzle more quickly than the rest of the economy, with 64 per cent of firms recording growth in productivity over the past two years.

Manufacturing productivity growth has outpaced both the service sector and the UK economy as a whole in the two decades to 2014.

The EEF is calling for the government to set out policies and an industrial strategy to support businesses.

“This is the strongest indication yet that a more balanced UK economy could also be a more productive economy,” said Terry Scuoler, chief executive of EEF.

Productivity, how much we are producing compared to the number of hours it takes to do it, has been near zero since 2007. From 1971 to 2007 productivity growth was fairly consistent, between three per cent and two per cent a year.

Read more: How can George Osborne revive UK productivity? Reform regulation and the public sector

Last year Chancellor George Osborne called raising the UK’s productivity “the challenge of our lifetime”.

Less productive jobs, misallocated capital, poor policy, or a permanent decline in trend growth have all been suggested as possible causes for the productivity slump, though economists are split on the how the problem should be tackled.

Concerns that UK manufacturing is under performing compared to its global peers persist however, with 49 per cent of respondents agreeing the UK is lagging other nations in productivity.

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