Jeremy Peat: Botswana is a long way to go to avoid Brexit but it's worth it

So if that is one topic to avoid, it is the right time to pick up another regular theme – productivity and the continuing lack of growth thereof in Scotland. On this front there is potential good news amid the bad news. The bad news is that the latest Scottish data point to a total lack of progress; Scotland’s absolute and relative performance on productivity remains as disappointing as has pertained for a decade or two. The good news is that there is a new idea to tackle this problem, a novel approach being prepared for implementation. This has been approved of by the Scottish Government and is being taken forward by the Scottish Council Development and Industry (SCDI).

Being an economist, a true dismal scientist, let us take the bad news first. In mid-February updated figures were produced for Scottish labour productivity up to the third quarter of 2018, alongside an assessment of Scotland’s performance in international terms, covering the period to end 2017. These data have to be considered in two contexts. First, comes the target set way back in 2007 to reach the rate of productivity achieved in the top quartile of OECD economies; second, the emphasis in all relevant papers - up to and including last year’s seminal work for the SNP by Andrew Wilson – on the importance of a major leap forward in productivity if Scotland wishes to thrive as an independent nation.

Analysis by the Fraser of Allander Institute shows that there was no (zilch) improvement in productivity in Q3 last year, and next to none in Q2. There had been marginal improvement at the back end of 2017 and early 2018, but the continuing performance is deeply disappointing.

The FAI’s longer term review is also fascinating. The ‘good old days’ for Scottish productivity performance were at the turn of the last century. For 5 or 6 years from 1998 we achieved the desirable outcome of a strong increase in economic output alongside stability in labour input – genuine productivity growth. We saw another surge in productivity post 2008 recession, but this was more of a statistical phenomenon resulting from the decline in output during recession being less than the decline in hours worked; not an achievement to be proud of!

Since 2008, for a decade now, Scottish labour productivity has been broadly static. There has been some limited growth in output, albeit way below the levels achieved at the turn of the century, but this has been alongside a comparable growth rate in hours worked. Output per unit of input, the economist’s key measure of efficiency, has barely budged.

This disappointing performance in absolute terms has, predictably, been matched by Scotland’s relative performance as compared to our international peer group. Consequently our level of productivity remains 20% below the level that would be required to reach that 2007 target of entering the OECD’s top quartile. Overall no joy in terms of the target of reaching that top quartile and hence concerns about our competitive prospects – in or out of the EU and/or the UK.

So what to do? In principle the solution is straightforward. Improved productivity can spring from some combination of increased investment, better skills more productively employed, enhanced innovation and improving management. The difficulty is that while we all know these theoretical solutions we lack new ideas as to how in practice any of these four key improvements could be achieved. In the past I have suggested a short term ‘productivity commission’, to produce ideas for business, government, academia, et al. Maybe that was clutching at straws. Novel thinking is needed, hence my interest in SCDI’s new idea.

This is for ‘Productivity Clubs’. In essence these would involve a group of businesses of different sizes and from different sectors coming together on a reasonably regular basis to share experience and learn from one another. Perhaps at each meeting there could be one company leading the debate, a company which has some positive experience to relate. The expectation must be that businesses would join the Club because they want to move up the productivity curve, to enhance competitiveness, internationally as well as domestically. They should therefore be receptive to new ideas, learning lessons to apply in their own activities from those with positive stories to tell.

Perhaps the odd economist might come along to a meeting here and there, but more to learn from folk with the benefit of hard practical experience than to pontificate. Perhaps academics from HE and FE could join in from time-to-time to hear about innovation in practice and best use of key skills. Perhaps Scottish Enterprise and the like could sit in, to take on board those positive experiences and think what they can share with companies who are not – yet – Club members.

When push comes to shove it is corporate efficiency which will determine Scottish economic success. Businesses learning from peer group Club members in a positive and constructive environment really could work.

Jeremy Peat is visiting professor at the University of Strathclyde.