23 June, 2015 - 11:36 By Tony Quested

Germany calling the shots in productivity terms

New intel from UK software company CloudBooking reports that the average German worker could leave their desk at Thursday lunchtime having produced as much as UK workers have managed by the end of work on a Friday.

The company’s CEO Gerry Brennan uses what he calls a “galling” fact to illustrate the gap in productivity between the UK and Germany – and to urge George Osborne to address the issue in his summer Budget on July 8.

As he correctly points out, Britain’s sluggish productivity performance is down to an alarming gap in R & D investment.

“We produce on average 30 per cent less per hour than our German counterparts, as well as the US and, even the French,” Brennan says.

His comments follow a BBC report last month that in Germany there are 1,034 R & D staff for every 100,000 people, whilst in the UK there are only 883 per 100,000. That’s 17 per cent more R & D staff in Germany than in the UK.

In a reference to the UK’s ‘long hours’ culture – starting early and burning the midnight oil – Brennan poignantly adds: “Britain is working hard, but it’s not working smart.”
EEF, the UK’s manufacturing body, has also urged the Chancellor to incentivise industry to invest more in R & D. EEF has urged Osborne to look at the whole infrastructure of manufacturing to address the productivity issue.

There is clearly a will among businesses in all sectors of the UK economy to invest as much as they can afford in innovation. Often the ceiling is lower than is healthy because parent companies or investors don’t want to shave too much off the bottom line.

Sages will trot out the old chestnut that ‘where there’s a will there’s a way.’ For the purposes of this economic inquest it is equally true that where there’s a will there is generally a corpse – and British industry is a dead man walking unless UK spending on corporate infrastructure is radically realigned. That means tax incentives – and it is questionable whether the Chancellor in ‘Austerity Britain’ has the financial firepower that such a root and branch realignment demands.

Cambridge University reported 15 years ago that tax relief given to French and German companies if they invested in new plant and people led them to invest even more the following year – and so on all the while the tax reliefs were left in place as an incentive to expansion.

George Osborne has enough balls to juggle at the moment so if he tries to introduce meaningful tax reliefs to spur R & D spend he could find two of them are his own! But juggle he must.

It would be helpful to the productivity debate if, at the same time, the Chancellor and PM changed the political agenda from scaremongering about a potential exit from the European Union to creating a more productive, innovative Britain within it.

The UK is an innovation nation. In Victorian times its enterprise led the world just as its industrial revolution inspired other nations to greater endeavours. Ironic, then, that in terms of turning R & D into productivity gains we are now lagging behind the best. And that Germany, conquered in two world wars, has found the wit, the will and the wherewithal to scrap its way to supremacy in terms of productivity.

The longer the Government permits the stasis the faster the UK will economically stagnate.

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