Lack of budget and technical skills holding UK businesses back from improved productivity

Senior Lecturer in the Business School, Dr Fidèle Mutwarasibo, has provided expert commentary for a new Open University report revealing that one in four businesses (27%) believe productivity has declined over the past five years, reflecting broader concerns ahead of the upcoming Budget.

The report, based on a YouGov survey of over 500 UK businesses, uncovers a disconnect in how organisations address productivity. Alarmingly, nearly a third (29%) of organisations do not measure productivity, despite three-quarters (75%) identifying it as a priority. This gap leaves many companies ill-equipped to identify areas for improvement. 

With UK productivity lagging behind countries like the US, Germany, and France—projected to be 0.1% lower in 2024 than in 2023*—the report examines how organisations prioritise, measure, and strive to enhance productivity. 

Two in five (41%) of UK decision makers agree the ongoing skills shortage is having a negative impact on the productivity of their organisation. Amongst the biggest barriers hindering productivity improvements are: 

• Lack of budgets (28%) 
• Lack of relevant technical skills (24%)
• Outdated systems of technology (24%) 
• Lack of leadership and management skills (21%) 
• Mental health and wellbeing challenges (20%) 

Dr Fidèle Mutwarasibo, Senior Lecturer and Director of the Centre for Voluntary Sector Leadership, The Open University, highlighted the importance of management skills in boosting productivity:

Leadership and management skills equip managers with the capability to consider how the organisation can evolve to improve its productivity. Perhaps by adopting new technological tools or processes, setting targets or capitalising on the diversity of its workforce”

Interestingly, while 27% of respondents offer hybrid and flexible remote working arrangements to boost productivity, only 15% view these as obstacles to improvement. In response to these challenges, employers are encouraged to invest in upskilling initiatives and prioritise employee wellbeing and explore new technologies. 

Despite an increased focus on equality, diversity, and inclusion (EDI), only one-third (30%) of organisations are leveraging EDI as a strategy for enhancing productivity. This missed opportunity may prevent businesses from maximising their current workforce’s potential and expanding and enabling and diversifying their talent pool from members of local communities who may have previously faced barriers to work and training. 

A significant disparity exists between large enterprises and small to medium-sized enterprises (SMEs): 75% of large businesses have implemented programmes or initiatives to enhance productivity, compared to just 37% of SMEs. This highlights that some productivity issues are more acute with SMEs who lack time and expertise to put interventions in place.  

Some organisations are optimistic about their productivity levels, with nearly half (49%) rejecting the notion that it has worsened over the past five years. This highlights how some organisations are embracing solutions to productivity, but this isn’t reflected across UK organisations as a whole.   

Viren Patel, Director of Employers and Partnerships at The Open University, stated: 

Low productivity has become the Achilles’ heel of the UK economy for the last decade and a half. This report underscores that addressing the ‘productivity puzzle’ is crucial for most organisations. With growth high on the new UK Government’s agenda, identifying barriers to productivity and establishing measurement systems are essential first steps.” 

“Increasing productivity isn’t about working employees harder for longer or recruiting more staff, it is embedded in employee wellbeing, development of skills, technology and equality, diversity and inclusion. Improved productivity will not only benefit businesses and the wider economy, but also work towards improving employees’ experiences.” 

The report also highlights sectors experiencing declines in productivity over the past five years: 

• Legal 42% 
• Finance and accounting 38% 
• Media/marketing/advertising/PR/sales 33% 
• Transportation and distribution 33% 
• Manufacturing 32% 

Safaraz Ali, Founder and CEO of the Multicultural Apprenticeship and Skills Alliance and Entrepreneur in Residence at The Open University, remarked: 

There’s no shortage of talent in the UK; the challenge lies in finding and empowering that talent within a productive workforce. Apprenticeships can be an effective strategy for organisations aiming to enhance productivity by creating a loyal talent pipeline with specific skills.” 

The report concludes with recommendations for businesses to unlock their productivity potential: establish productivity goals, setting up data-gathering processes, invest in reskilling and upskilling the whole workforce and explore opportunities to deploy new technological tools, unearth the hidden talent within the workforce and local community and actively support wellbeing in the workplace.

*https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourproductivity/articles/ukproductivityintroduction/august2024