Are there positives hidden in the UK’s decline in productivity?

There has been much worry about the UK’s continued weak productivity and the fact that it continued to decline in the last three months of 2014.

While this continues to be a concern in terms of UK business competitiveness globally Daily Telegraph Business columnist Allister Heath last week suggested that “at least some of the UK’s productivity shortfall was a good thing”.

Why? Because the UK’s success in reducing the numbers of unemployed has distorted the picture, somewhat exaggerating the productivity problem. His argument is that large numbers of those now back in work were “low productivity workers” and that this has dragged down the average productivity per worker.

He also argues that more needs to be done to improve productivity by improving the skills of these workers with vocational training and education.

Further, he argues, to improve productivity requires dramatic improvement in the UK’s infrastructure, not by increasing government capital spending on such projects as the HS2 rail projects but by encouraging private sector investment.

Certainly the UK needs to increase capacity, to improve efficiency and to grow its export markets.

“We need to unleash the forces of entrepreneurship and competition on all kinds of capital projects, from transport to energy”, he says.

Do you agree with him?

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