THE Confederation of British Industry has underlined the need to boost productivity rates in Scotland after a study found average output in the country is 25 per cent lower than in London.
The employers’ organisation said the Scottish Government must make increasing the efficiency of business its number one priority in the forthcoming Budget claiming increases in productivity could add billions to the economy.
The call comes as an exclusive analysis of official figures for the CBI underlines the scale of the challenge facing Scotland at a time when growth in the country has been hit hard by the downturn in the North Sea.
The CBI found Scotland performed relatively well compared with parts of the UK in terms of productivity on the standard measure of gross value added per hour.
However, the £30.20 value generated per hour in Scotland trails well behind the £40.23 per hour achieved in London.
Productivity in Scotland is up to £3.40 per hour lower than in parts of south east and eastern England.
The figures are likely to reinforce longstanding concerns about Scotland’s performance on a key measure. The CBI said good productivity is vital for long-term, sustainable economic growth.
Perceived failings on the productivity front will make it harder for Scotland to attract overseas investment amid fierce completion from other countries and parts of the UK.
The figures highlight the gulf between Scotland and some areas of the UK which are achieving fast growth, thanks partly to their success in attracting high tech businesses.
The CBI said the Scottish Government could provide a significant boost to the economy by helping businesses catch up with rivals in better performing areas, raising living standards in the process.
Research by the organisation found that unlocking higher regional productivity could add £208bn to the UK economy over the next decade, with Scotland in line for a significant share of the benefit.
“By understanding what lies behind the differences in regional productivity we can begin to address the fact that not everyone is sharing in prosperity,” said CBI Scotland director, Hugh Aitken.
“Policymakers have a part to play by creating an environment where businesses can thrive and compete, creating jobs and growth.
“But companies can and must act too, by continuing to enhance their engagement with schools to support vital careers services, and implementing improved management practices to close the gap with our peers overseas.”
Mr Aitken said a progressive industrial strategy, delivered in partnership between business and the Scottish Government, and fuelled by innovation and infrastructure spending, will help to power productivity across the country.
The research found big differences in the performance of different areas within Scotland.
Aberdeen and Aberdeenshire achieved £36.36 GVA per hour. Glasgow and Edinburgh produced £28.68 and £34.39 respectively.
“Some parts of Scotland – like Aberdeen and Aberdeenshire – have seen world-class productivity gains,” said CBI Scotland. “Too many towns and regions have been left behind, limiting opportunities for millions.”
CBI Scotland noted large disparities within regions. Productivity in Caithness and Sutherland and Ross and Cromarty is 34.5 per lower than in Aberdeen City and Aberdeenshire.
The analysis is based on Office for National Statistics figures for 2014. The slump in the North Sea oil and gas industry has hit North East Scotland hard since then.
CBI Scotland believes the downturn has increased the need for official action on productivity.
The report identifies four main drivers of regional productivity differences: The educational and skills levels of young people; transport links; the quality of management practices and the proportion of firms involved in innovation and exporting.
CBI Scotland wants the Scottish Government to help strengthen Scotland’s skills base, to boost innovation and to improve transport links.
Scotland must stay open to global trade and investment. The country’s government must be closely involved in negotiations with the European Union to ensure Scotland gets the best possible deal after the Brexit vote.
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