How is cutting a 2010 £157 billion government budget deficit/overspend to £90 billion this year, "austerity". lol
blacksunday …. No one inclluding the BoE seems to know why our Productivity levels are so low versus other countries.
But what I DO KNOW is that if we carried on as we were up to 2010, when Labour having lost around half our Manufacturing base (23% of our economy in 1997, 12% by 2010) and kept pumping money into Public Sector quangos and non jobs – our Productivity would be far WORSE, as no other country had unbalanced their economy so badly in the good times, as the UK did.
This recession was totally different to past ones, where interest rates went sky high, the Private Sector laid off huge numbers of people massively increasing overall unemployment, so then lean companies were more ‘Productive’ as a measurement – banks would then lend, as businesses were confident expecting interest rates to come DOWN.
This great recession started with near 300-year low UK interest rates, taxes were rising into the recession, the fall in Private Sector employment after the crash, was unaccountably mirrored by RISES in Public Sector employment (see the forth graph below), since adjusted over the last 5-years dumping loads of £50k plus Public Sector managers/quangocrats and probably replacing them with lower paid Private Sector jobs, as they rebalanced the economy.
www.bloombergview.com/articles/2014-12-22/uks-holiday-cheer-in-four-charts
Moreover businesses from 2010 needed tax cut help and post recession confidence rebuilt with some political certainty they never had under Labour since 2008, knowing the next TREND in interest rates will be UP (not down as previous recessions) but with the huge uncertainty (political risks) of a Coalition government back then – and for the next 5-years.
Anyhoo, this is what that nice Mr Peston had to say about it.
Weep for falling productivity – by Robert Peston”
www.bbc.co.uk/news/business-32146712
”The point is that a big contributor to the absence of any growth at all in output per worker and output per hour is that employment has grown much faster than national income: unemployment rose proportionately less in the downturn than in previous recessions and new jobs have been created faster than the growth in output.”
”But if that's the good news, there is also a very troubling corollary.”
”Lower productivity undermines the competitiveness of British firms in the global economy.”
”And the absence of productivity growth undermines the ability of British firms to increase our pay.”
”Why has productivity been so limp?”
”There are plenty of competing explanations, which include:”
”1. Productivity growth before the crash was exaggerated by the spurious productivity of banks and City firms that were taking crazy economy-imperilling risks;”
”2. Since the crash, too many lame duck firms have been kept afloat, under pressure from politicians, preventing the necessary re-allocation of capital from low-productivity firms to better ones;”
”3. As a nation we're lousy at innovation and we don't have enough highly skilled people (compared with Germany, for example);”
”4. The City is too short-termist and is hopeless at investing in winners;”
”5. Companies lack the confidence to invest adequately in expensive new kit, and would rather incur the costs of taking on cheap people to boost output, confident they can fire these people if all goes pear-shaped.”
”Getting to the root of the problem matters. Because unless we can improve productivity, we won't be able to afford the living standards we feel we deserve.”
What I do know is that to INCREASE UK PRODUCTIVITY, putting a plethora of business taxes up from 2015 to 2020 and forcing the Minimum Wage up regardless of what the Low Pay Commission says, is neither going to allow businesses to remain as confident as they currently are, or invest/employ.
Whether a government wants to increase Productivity, pay our bills, reduce our debts, or build a shed loads of pledged Homes, they HAVE to be able to relate to small, medium and large businesses - rather than ideologically bash them at every turn.