Hundreds of pages have been written over the years seeking to explain Scotland’s productivity performance. Almost as many pages have been written on new policy ideas designed to boost our productivity growth rate.
For many businesses, productivity remains an abstract term irrelevant to their day-to-day activities. But it does matter. For a country of Scotland’s size, with limited population growth or income “catch-up” available, productivity is key to growing the economy.
Scotland’s productivity is now broadly in line with the UK as whole. But that’s not much to write home about. Over the last decade, UK productivity growth has been amongst the weakest of any high-income economy.
A recent report by colleagues in the Adam Smith Business School at the University of Glasgow – Scotland’s Productivity Challenge – seeks to throw new light on the age-old productivity puzzle. Their report for the UK’s new Productivity Institute – a £30 million investment by government into understanding our productivity challenges – is well worth a read.
It talks of Scotland’s economy being a story of contradictions. We have an economy with world-leading companies in sectors from energy through to life sciences, financial services, and food and drink. But alongside that, we have a business base that is often less innovative and entrepreneurial than other parts of the UK. We have one of the most educated workforces in Europe. But skills shortages across key sectors and a higher percentage of adults without qualifications than the UK average.
Some will argue that seeking to boost productivity should no longer be a key priority. Instead, tackling inequalities and achieving net zero are more important. But this assumes that these objectives are inconsistent. A more prosperous economy, within the constraints of protecting our environment, can be a key driver of wellbeing. It is vital for generating the resources in the public and private sectors to support a better quality of life.
Innovation and research and development, and the adoption of new processes, will be crucial to the technological breakthroughs required to help us tackle climate change. We must remember too that productivity can improve not just because we are producing “more” but because we are producing “better quality”. Equally, it is not about working harder but working smarter. A country like Scotland should focus on quality and smart working – not volume.
So, what are insights from this new report?
One is that change isn’t easy and any claims of transforming Scotland or the UK’s productivity performance in the short term should be met with scepticism. Boosting productivity, just like initiatives such as levelling-up, are endeavours measured in decades not years.
On practical measures, one suggestion is that alongside seeking to support high-end firms operating at the sharp end of the productivity curve, we need to consider how to best support the productivity of our core business base. This is less about developing new technologies but being better able to adopt existing ones.
It also suggests focusing upon boosting core digital skills just as much as trying to grow the next generation of digital tech superstars. Crucially, this isn’t just about public money but collaboration across businesses themselves.
Supporting the growth of digital skills and adoption of technologies has long been a priority of successive governments in Westminster and Holyrood. The focus of the Productivity Institute in tracking “what works” and developing an evidence base on the benefits – and challenges – that firms face in the digital world should lead to better targeted policy and business support initiatives.
It might only be a small step, but if successful then it will offer one solution to the productivity puzzle that has dominated debate for so long.
Graeme Roy is professor of economics at the University of Glasgow’s Adam Smith Business School
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here