Seven out of ten (70%) manufacturers surveyed say it’s a challenge to become more productive. Eight in ten (81%) admit their businesses suffer from skills shortages – a potential barrier to increasing productivity – although this is an improvement from the figure in last year’s survey (88%).
The findings come after official Q3 data, released earlier this month, showed that labour productivity, measured as output per hour, increased by 5.2% quarter-on-quarter as the UK economy recovered from the Covid-19 lockdown in the spring. However, the UK continues to be less productive than other advanced economies.
Economists say boosting productivity is crucial to creating higher-paid jobs and greater prosperity. The UK is partly reliant on manufacturers to drive gains because the sector is on average more productive than other areas of the economy.
The Lloyds Bank Business in Britain Manufacturing, an annual state of the sector research report, also revealed that firms are cutting their investment in research and development (R&D) because of the effects of Covid-19. Four in ten (41%) have slashed their investment in R&D – considered a key way of boosting innovation and productivity. This compares to just under a third (31%) who are investing the same amount and a quarter (25%) who are investing more in R&D to help drive growth.
The survey showed that there is no common definition of productivity, with manufacturers variously tracking factory output (41%), worker output (26%) and output per machine (20%).
Huw Howells, head of manufacturing and industrials at Lloyds Bank, said: “Improving productivity will play a crucial part in the UK’s recovery from the Covid-19-induced upheaval. In manufacturing, as in other sectors, investment remains key to increasing innovation and boosting productivity. In the face of challenging economic times, lenders have a key role to play in continuing to support businesses to tackle the productivity crisis.”
Meanwhile, 55% of survey respondents said the pandemic has spurred them to invest more in skills and development, to replace retiring workers and hire employees fit for new working practices.
Lloyds Bank surveyed 200 large UK manufacturers, half (53%) of whom have annual revenues of over £500m.
