UK Productivity Growth
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The UK Productivity Puzzle – Is Technology The Answer?

The UK’s Productiv-IT-y Puzzle

Last month, official government data shows that over the last decade UK productivity growth fell to a level lower than at any time in the 20th century.

At a time when technology is prominent in the workplace with small and large corporate companies moving to more cloud-based solutions such as Microsoft Azure, Office 365 and AWS – how is the UK growing at a lower level than ever before? What this does show is a stark contrast between the available solutions in the market with the bottom line being either coming down to the mindset of people/employees or what the business is actually looking to achieve – “productivity”.

CBI and McKinsey have recently produced reports saying that “by simply improving the average quality of people management by only 7%, this can inject around £110bn into the economy.”

 

Driving Technology Through Adoption

In a world of ever-changing technology, SME’s are struggling to understand what steps they can take to continue to be competitive. McKinsey reports that only 12% of businesses are seen as proactive “digital movers” investing in new technology to grow the UK as well as their own competitive advantage – nearly twice that of businesses are “playing it safe”.

By 2025, nearly 20 billion devices will be connected in some shape or form – nearly three times the world’s population. Over the past 2 years alone these devices have churned out nearly 90% of the data ever produced which begs the question as to why businesses continue to reject change and remain safe when many sectors are craving innovation.

With ever increasing changes across every sector the ideology around “if it isn’t broke don’t fix it” becomes void and results of this can be seen from major retailers through to smaller businesses who are now playing catch up. An example of this is Maplin, who were once a market-leading high street electrical brand that fell short due to competitive pricing from growing online giants and that consumers would rather order online than come in-store. This is further grounded by the fact that only 8% of companies believe their business model will remain viable through digitisation – finally something recognised by businesses but not being catered for.

A number of manufacturers and retailers are being bold and leading the way, such as Amazon Go automating the shopping experience and Ocado’s robotic warehouse all attempting to revolutionise the customer experience, productivity and efficiency. These businesses are highly recognised in their fields and have been around for 20 years, whilst long standing 50+ year retail and high street brands are struggling to innovate. Innovation in a technology driven world is one of the key elements needing to be instigated when productivity is at an all-time low.

 

5G – Data Intensive Productivity

The timeline of network capability from 1G through to 5G shows that advancements in this area occur every 10 years.  The progress from 1G to 2Gb saw a 20x fold increase in speed whilst increases from 3Gb to 4G saw a 30x fold increase – how will such increases unfold as the world begins to migrate from 4G to 5G?

The introduction and debate surrounding 5G brings with it the benefits of dramatically increased speed and richer connectivity in the hope that it will put the UK productivity at the forefront however, it doesn’t come without its hurdles!

Extensive new infrastructure is required across all areas, existing cell sites need to be upgraded, new sites need to be set up to support the 5G era. Moore’s law, originated around 1970, states that processor speeds and power for computers double’s ever two years – so is investment and leading this area going to provide tangible results to solve the UK’s productivity puzzle?

It all comes down to consumption being a major factor for 5G, the point raised above, regarding 20 billion devices worldwide is where 5G will allow us to be more connected than ever before catering for up to a million devices per square kilometre. Every day we demand more and more data from our working day through to our own personal use but is this ultimately impacting business through the shear amount of data that is being processed or producing the results we actually want to see.

 

The Technology Invest Debate

There are debates taking place around the suppliers and partners involved in the UK 5G rollout, but it will put the UK at the digital edge when it comes to implementing this next level infrastructure. The question of the UK’s capability to deliver productivity and competitiveness around the world will once again be put under the spotlight.

Countries that adopt 5G first will be at the forefront of technology, but will this coincide with ironing out the issues we are surrounded by in the UK? And will the UK use this to its advantage before it becomes commonly adopted.

The Office for National Statistics recently reported that it has taken a decade to deliver as much productivity growth as was previously achievable in a single year. This raises concerns around whether the UK are front loading investment in technology to compensate for these reported low levels of productivity to reverse the current state of the market.

As the digitally connected world drives more consumption of data, our need for faster speeds and reliability is certainly something that will not disappear anytime soon. SME’s, Fintech and Entrepreneurs who step outside the box and act as the front runners for new innovative solutions are taking the risks – risks that are starting to bear fruit.

The main question to take from this blog, is what it will take for more established businesses who command particular sectors to innovate in our digitally transforming world. These businesses are critical to the success of the UK and without their openness to new technology comes the dangers of forgoing innovation and Productivity.

 

Sources

McKinsey Report – Productivity Paper September 2018

The Guardian – UK Productivity Growth Statistics

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