"Weakness in the UK’s educational system, market regulation and public infrastructure relative to some other countries are also likely to be important factors. There is no simple fix for these problems.
"Although lower rates of marginal taxation might be helpful for some growth sectors, this is unlikely to provide a magic bullet, even if it were affordable.”
Douglas McWilliams, formerly chief economist for IBM (UK) and current deputy chairman of the Centre for Economics and Business Research, says the nature of how banks do their accounts means that while the 'profits' on the trading of financial instruments are put into the company results as soon as they happen, losses may not be in the accounts for several years, so there is a lag in terms of when the economy shows the drop in productivity.
McWilliams says he agrees with the idea that the short-term productivity of compliance roles may be hard to measure, but he adds there is also a risk that rules in the financial sector may also be too tight now, even if they were too loose previously, and so the productivity of this part of the economy is weaker.
Types of employment
Baker cites another example of how shifts in the type of employment in the UK economy have altered productivity data.
She says: “With jobs such as mining, the productivity is very easy to measure, you can just count how many lumps of coal or whatever are extracted each day.
"But as the UK now has fewer miners than it did decades ago, among the jobs that people are increasingly doing now are social care roles. And its not to say those jobs are less productive than mining, but the productivity is harder to measure right now."
Baker attributes the productivity issues facing the UK economy as being the consequence of poor-quality training and outdated management practices in the UK, as well as uncertainty around the country’s economic prospects around Brexit-dented business confidence.
The first of the two factors McWilliams says are key to the UK’s productivity decline is the relatively larger portion of the UK retail market that is online, and that right now statisticians are unable to measure the impact of this.
He actually wrote a book on this challenge in 2015, and says: “The danger with productivity is that measurements are hard to make. One of the sectors where this applies is online retail, where right now the productivity of the delivery drivers is not really measured properly.
"And the latest figures I have seen indicate that online retail is about 5 percentage points higher in the UK as a percentage of total sales than in continental Europe, so when it comes to productivity measurements, that is quite the difference."
