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British election: a hunt for ingenuity

As the campaign starts for a May 7 election, politicians debate Britain's need for innovation in business. Other countries should follow this British battle over how to boost productivity growth, which has been close to zero for years.

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British Chancellor George Osborne makes a statement following the release of the OECD's economic survey of the United Kingdom Feb. 24. The report from the Organization for Economic Cooperation and Development highlighted the UK's strong growth and employment levels. But it cautioned that a failure to boost productivity was "holding back real wages and well-being."

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Britain’s campaign for its May 7 election began this week not with a bang but with a bust. New data revealed that the country that launched the Industrial Revolution has seen little growth in productivity, or output per worker, for seven years.

In a way, this is good. The opposition Labour Party jumped on the issue in its contest against the ruling Conservative-led coalition. A public debate on how British workers can become more efficient will only enliven a global debate on ways to solve the “productivity puzzle,” or a surprising stagnation in the kind of innovation that ensures living standards keep going up.

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Britain is in good company as many countries, especially China, are searching for the secret sauce to build creative enterprises (“the next Apple”) and keep a competitive edge in global markets. Relying on cheap labor is now seen as only a short-term strategy.

Britain’s negligible rise in productivity “is unprecedented in the postwar period,” states the government Office for National Statistics. Among leading industrial nations, only Japan has a worse record. And Britain’s rate lags far behind that of Germany, France, and the United States.

Prescriptions for Britain’s productivity problem were flagged in a February report by the Paris-based Organization for Economic Cooperation and Development. The OECD advised Britain to improve on its “education and skills, take-up of research, infrastructure and land-use planning, and access to finance for young and innovative firms.”

In short, as the British innovation think tank Nesta stated in a recent report: “There would be substantial productivity benefits if Britain made it easier for the best businesses to grow.”

Investments in innovation these days are often more in intangibles – such as risk-taking people with high skills, bright ideas, and advanced knowledge – than tangibles like computer chips or rocket ships. Two decades ago, management guru Peter Drucker predicted that one of the greatest challenge in the 21st century would be improving the productivity of knowledge workers. 

Britain is historically open to ideas, people, trade, and investment. In fact, about half its venture capital comes from the US. This openness is a key asset to build on as it promotes itself with the slogan “Brand Britain” while also boosting home-grown innovation.

One British researcher, Ben Ramalingam of the Humanitarian Innovation Fund, says those in the “innovation movements” too often look for technology solutions when what is needed are improved qualities of thought. He cites trust, humility, and patience as key ingredients for raising productivity.

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Such qualities help reduce the fear of innovating. As another OECD report points out, US productivity growth is higher than that  of Europe because of “a greater degree of experimentation and ‘learning by doing.’ ” Fear of failure is something to punch through in places like Silicon Valley.

In the heat of its election campaign, British politicians may prefer not to debate such drivers of innovations. But at least they’ve jumped on productivity as a soapbox issue. Something inventive might come of it.