Friday 06 July 2018 4:10 pm

The productivity puzzle is being solved as we speak… in Sheffield

The latest official productivity statistics for the first quarter of 2018 are out today, and they’re expected to show the UK’s “lost decade” of productivity growth since the financial crisis has extended into its eleventh year.

Figuring out how to tackle the UK’s flagging productivity has become a priority for the Bank of England. Monetary policy alone isn’t the answer – at the Academy of Social Sciences last week, the Bank’s chief economist Andy Haldane encouraged the private sector and the government to bridge the gap between the nation’s least productive firms and the most.

The Bank of England has already been given a demonstration of how to make this happen. In 2015, governor Mark Carney came to the University of Sheffield’s Advanced Manufacturing Research Centre (AMRC) and was shown two photographs that illustrate what happens when you get productivity right, and when you get it wrong.

The first was the Orgreave coking plant that closed in 1990, a brown and broken edifice dissolving like a rust stain into a post-industrial landscape. The second, taken a decade later in 2004, showed a solitary, gleaming building. It might look forlorn, but the bright jewel in the dirt was the first AMRC building.

Today, the AMRC is a hub of a fast-growing, high-value manufacturing cluster whose members read like a roll-call of industry’s finest.

How has this happened? That word again: productivity.

Ironically, Sheffield might seem an unlikely place for a productivity revolution. It is at the bottom of the national league table for productivity – 19.2 per cent below the UK average.

Averages deceive, however. Boeing, Airbus, McLaren, Rolls-Royce, and BAE come here not to languish in the relegation zone, but to become world champions, thanks to the AMRC.

Not a half-point improvement here, or a percentage step forward there, but lung-busting leaps of progress. The leap that enabled Messier-Dowty to reduce landing gear production times by 80 per cent, securing a major Boeing contract. Or the 50 per cent improvements in fan-disc production enabling Rolls-Royce to invest £100m in the north east. Or the productivity gains supporting Boeing’s location of its first European production facility in Sheffield, cutting component manufacture from over two hours to under six minutes.

Thanks to investment in automation and digitally-integrated manufacturing, businesses such as BMW Mini in Oxford and Jaguar Land Rover in Coventry win more domestic and overseas orders and increase their turnover.

So can the technologies driving these productivity gains cascade from the summits of high-value aerospace down the value chain? The evidence from the industrial scale research cells at the AMRC is that these performance-enhancing processes apply just as much to the family-run hand-tool manufacturer employing six people as they do to a super-car manufacturer like McLaren employing hundreds.

This will require government intervention and support for collaborative R&D hubs – where solutions can be tried and tested before manufacturers adopt them – to offload the risks for smaller firms and ensure the supply chain reduces the time and cost for building high-value components.

The earlier UK manufacturing firms adopt automation and digital technologies in their production lines, the faster we will see improvements in our productivity. On their own, manufacturers cannot retrain their staff to use these new tools, so universities up and down the country must have more freedom to lead on training and knowledge exchange with manufacturers in their regional economy.

All this may seem far removed from the overarching “grand challenges” of the government’s industrial strategy – from clean growth to caring for our ageing society. But, as one manufacturer remarked, such challenges are “rather too grand for many of us”.

What he needs is simply access to the same digital technologies that the big boys are playing with. Without it, he and his workers risk becoming “no longer economically viable”, like the Orgreave Coking plant in the first image shown to Carney.

Unlike in the 1980s, however, there is an alternative to redundancy and decline. That alternative is in the second image. It just needs to be available in many more regions, if we are to solve our productivity puzzle.