It is now indisputable that the UK’s, and in particular London’s, economic recovery are well underway. But as Mark Carney, governor of the Bank of England, has rightly pointed out, challenges remain, and the most important of these is productivity.
Contrary to popular assertions, productivity in the UK economy remains quite high in comparison to most countries. But it simply and stubbornly is not growing in the manner you would expect from a well-balanced, healthy economic recovery.
As such, the biggest and most perplexing question facing policymakers and business in the UK today is where exactly is this increase in productivity going to come from?
The answer lies not in a narrow focus on a specific sector. Instead, a significant and indeed disproportionate growth in productivity can result from those emerging SMEs and established companies, which are pioneering and embracing new technologies, and driving cross-sectoral innovation.
These people can be efficiently characterised as the makers: a new generation of internet-savvy industrialists for whom innovation, disruption and imagination is in their DNA.
Crucially, according to ground-breaking research we commissioned, the productivity of makers is over 50 per cent more than the average UK worker. As the RSA also pointed out last week, SMEs are outperforming larger performers in the majority of the UK economy’s sectors.
Making in itself is not a new phenomenon. It is something the UK has been doing for hundreds of years. It is an ethos and culture that has been the driving force behind the Industrial Revolution that transformed the world. But it is also something that in its traditional form has steadily declined in the UK, as the relentless pace of globalisation has led UK companies to outsource manufacturing and production to China and beyond.
Yet the making revolution that has been taking place throughout the UK, and in particular London, over the past few years, is a potential game-changer. It has the potential not only to reverse the outsourcing trend, but also to go a long way to resolving the productivity conundrum, and ensure the UK remains at the forefront of global innovation for decades to come.
The internet and rapid advances in technology have drastically reduced the barriers to innovative ideas becoming prototypes and physical products at lightning speed. All designed, developed, manufactured and produced, within the UK. No longer does the default have to be offshore manufacturing, nor should cost or access to technology and equipment be a barrier to SMEs developing their ideas into products that could quite literally change the world.
These activities are already contributing up to £18bn in Gross Value Added to the UK economy, and nearly 300,000 jobs. In London alone, the figures are nearly £2bn and 30,000 jobs. The making revolution is well underway, yet it has gone largely unnoticed by policymakers. But the makers shouldn’t be taken for granted.
The value of making activities, and their potential to disproportionately boost productivity, should be better understood. At the very least, policymakers need to ensure they don’t unwittingly constrain their growth and stop the making phenomenon in its tracks.
Access to finance, a chronic lack in certain sectors of high-skilled workers, and a lack of awareness of the vast benefits of collaboration and the crossovers between emerging and traditional industry sectors, are all significant threats.
The UK economy has proved time and again that it is at its strongest when we are a nation of makers. For the economy right now, boosting productivity is the Holy Grail. As Carney has rightly pointed out, our shared prosperity depends on it.