British governments have cycled through a rich array of “growth” strategies over recent decades. The Truss administration is the latest to grapple with the UK’s persistent productivity and growth challenge. And it does so in the most trying of environments: inflation has soared, public services are in distress, and long-standing regional inequalities endure despite promises of levelling up.
The Truss thesis is that the tax burden, especially the tax burden on business and on households, is the source of the UK’s slow growth. Despite the inflationary environment and apparent weaknesses in the exchange rate, the thesis is that an adrenaline shot of demand will set the UK on a new growth trajectory, unleashing private enterprise in the process, lifting up investment, incomes and tax take as a result. That will enable the UK economy, once energy price increases work their way out of the system, to lift up and out of a sluggish growth paradigm.
Whether this theory proves to be correct in the short term or not, some fundamental conditions will need to be in place to maintain growth over time. And given the recent spate of short-serving PMs, it shouldn’t come as a surprise that we haven’t made a dent in generational, systemic weaknesses within the British economy.
In fairness, Friday’s mini-Budget contained some useful long-term measures. Planning reforms, investment in infrastructure, a permanent increase in business investment allowances, public land release for housing and support for creating investment in the industries of the future are to be welcomed. More is still needed.
One underplayed factor in debates about long-term growth is how to ensure that organisations can deliver productive change and make it self-sustaining. It is certainly a missing piece of the “Growth Plan” jigsaw. Change is led and managed by individuals equipped with the right skills. Whether a new product line or reorganising a business or public service, you need the right people in place. Lasting change isn’t an art form, it’s a science. For example, when information and communication technology is adopted with good management practices it achieves a 20 per cent productivity improvement compared with just a 2 per cent uplift when adopted with poor practices. Future UK productivity requires higher-level technical and management skills.
To sustain any growth strategy over time, the UK will need to see greater commitment to investment in developing the skills and behaviours of leaders in order for them to create work environments that are conducive to productivity and, therefore, growth. Know-how about seemingly mundane things like developing effective organisations, building good organisational relationships, including all the workforce in performance improvement, and good decision-making processes will help to sustain growth over time. Good employers and good managers also develop others and share opportunities widely.
As shown throughout the Covid-19 pandemic, professional management was essential in the face of adversity: here, professional meaning agile and well-being-focused. In order to adapt to new ways of working and boost morale, we needed conscious leaders at the helm. This wasn’t just about keeping employees happy. The Office for National Statistics found that better-managed firms maintained their productivity advantage over their rivals even during the most difficult moments of the pandemic. Just as we saw during the pandemic, the investment in these skills will be critical for businesses to navigate the volatile economic future.
Key is considering what structures you already have in place that you can build change from. For example, with workplace skills being a key driver of productivity, how can we develop the apprenticeship programme, already a major contributor to growth, through augmenting higher-level technical and management skills? Upcoming Chartered Management Institute research shows that the return on investment from the levy and investment in standards-based apprentices is enormous.
Good management seeks improvement rather than seismic change – and the same should go for policy. Sustainable change needs to do the more hidden, long-term things relentlessly – whatever the fate of the short-term theory of growth.
The short-term aspiration to get the economy firing is a laudable one. The Conservatives and Labour both articulate this aspiration as their prime policy focus. The new Prime Minister has a clear theory of growth. Her political fate will rely heavily on any proof of that theory. Unblocking the UK’s deeper productivity challenge will rely rather more heavily on the long-term measures she puts in place now.