:00:00. > :00:00.Now on BBC News, it's time for Talking Business.
:00:07. > :00:16.Making businesses more productive is crucial to a country's long-term
:00:17. > :00:19.prosperity, but the UK is in its eighth year of productivity goes
:00:20. > :00:24.slow. Workers here are producing significantly less per hour than
:00:25. > :00:28.other industrialised nations. On this weeks programme we are looking
:00:29. > :00:30.at wide Britain lags so far behind and what can be done to put it back
:00:31. > :01:03.on track. Welcome to talking business from
:01:04. > :01:08.London, I am Tanya Beckett. Workers are 18% more productive than our
:01:09. > :01:14.average for our G7 partners, it is the widest gap since the 1990s. The
:01:15. > :01:19.British government has claimed that boosting productivity is the
:01:20. > :01:23.economic challenge of our age. -- 18% less productive. I have been to
:01:24. > :01:31.a company that is turning things around. For this car logistics
:01:32. > :01:37.company, productivity is at the heart of the business. We are trying
:01:38. > :01:41.to compete in a global economy and the competition from China, India,
:01:42. > :01:48.all over the world, it is getting tougher and tougher and an all of
:01:49. > :01:53.lot -- an awful lot of them compete on price because of the hourly rate
:01:54. > :01:57.they charge. If we can improve our processes and the products we offer
:01:58. > :02:02.our customers by using the skills and talents of our people every day,
:02:03. > :02:10.then we can continue to compete and grow. Unipart spent years in the
:02:11. > :02:17.slow lane, it is now part of an industry that is the most productive
:02:18. > :02:22.in the world. Back in 1993, we had the lowest value added per employee
:02:23. > :02:27.and the lowest stock turn of any automotive company anywhere in the
:02:28. > :02:30.world. We were facing an organisational life-threatening
:02:31. > :02:35.crisis and we either got our act together or we would have been
:02:36. > :02:40.completely obliterated. Here that journey was more about changing the
:02:41. > :02:45.culture than spending cash. We often talk to people and said grey matter
:02:46. > :02:50.before the greenback. Creativity before capital. There are a huge
:02:51. > :02:53.number of ways to improve productivity without investing any
:02:54. > :02:57.capital at all by harvesting the skills and talent of the people.
:02:58. > :03:00.Provided there is unambiguous leadership from the top and there is
:03:01. > :03:05.real commitment and being gauge with the whole body of knowledge, within
:03:06. > :03:10.12 months we can get relativity improvements anywhere between 20 and
:03:11. > :03:16.40% and then five and 10% on top of that forever. It is an approach that
:03:17. > :03:21.can be applied and measured across all areas of the economy. What you
:03:22. > :03:25.are measuring is the improvement in quality, the improvement in cost and
:03:26. > :03:30.delivery and reduction in cycle times, the elimination of waste. We
:03:31. > :03:35.have implemented the Unipart way into major banks, insurance
:03:36. > :03:40.companies, into HMRC, every single time we have done it, the quality
:03:41. > :03:44.has gone up, the cost has gone down and the productivity has improved.
:03:45. > :03:51.Could solving the British productivity puzzle be a question of
:03:52. > :04:00.mind over matter? To help me pick through the productivity puzzle in
:04:01. > :04:05.more detail, I am joined by James who is part of the Institute of
:04:06. > :04:12.directors, and we have a spokesperson from a mother and baby
:04:13. > :04:17.chain. We also have the executive director of policy and research at
:04:18. > :04:23.an independent charity which works to increase the innovation capacity
:04:24. > :04:28.in the UK. Welcome to view all. James, allow me to start with you.
:04:29. > :04:35.Perhaps we should define what productivity is and then get on to
:04:36. > :04:40.what is important about it. It measures how much better we are at
:04:41. > :04:45.doing something this year than we were in previous years. There are
:04:46. > :04:50.big problems with that. You were asking productivity per hour. A lot
:04:51. > :04:56.of us have a contract saying we worked 95, but we do a lot of stuff
:04:57. > :05:12.that is not 95, you may order Amazon books while at work. -- 925. -- 9am
:05:13. > :05:21.to 5pm. Is a society generally speaking, if it has good high
:05:22. > :05:29.productivity, is it better off? If a country can produce a lot, do a lot
:05:30. > :05:32.either per hour or per worker in the country, there will be more goods
:05:33. > :05:36.and services and it will be a wealthier country. One of the things
:05:37. > :05:41.we have seen in the UK is not only is the productivity lower than other
:05:42. > :05:45.rich countries and other G-7 countries, but we see something
:05:46. > :05:49.really worrying happened since the 2009 recession, the productivity gap
:05:50. > :05:54.between us and Germany and the US has got bigger since 2009. That is
:05:55. > :05:59.something that economists and business people are worried about.
:06:00. > :06:03.Tesco back to why that may be the case in a second, Laura you are
:06:04. > :06:08.running an actual business. Is productivity something you talk
:06:09. > :06:16.about in your business? In retail we tend to look at like-for-like sales,
:06:17. > :06:19.we do look at productivity in areas like warehouse distribution. But
:06:20. > :06:23.when you are talking about a business that relies hugely on
:06:24. > :06:27.well-trained staff, knowledgeable sales assistants, we are not going
:06:28. > :06:32.to look at the amount of parcels we get out of our stores per hour,
:06:33. > :06:38.because we want our sales assistants to spend time with the customer. It
:06:39. > :06:43.is not about a pile it high, sell it cheap attitude, it is an informed
:06:44. > :06:48.purchase that the consumer will make. They need to have the time put
:06:49. > :07:00.into it. We cannot always look at productivity. We need to look at
:07:01. > :07:03.EBITDA. Maybe productivity is not always an appropriate measure of
:07:04. > :07:11.success and what Laura is saying in some cases, parts of our business,
:07:12. > :07:16.it is not appropriate measure. I think that is the case. I go around
:07:17. > :07:21.the country and talk to companies about this. They say we do short run
:07:22. > :07:30.production of various goods and services. I was in Scotland and they
:07:31. > :07:35.produce short runs of things. That is what the customer wants. They
:07:36. > :07:41.want and agility, to respond to changes. If you want cheap, go to
:07:42. > :07:46.Turkey, but if you want high value added things with agile, flexible
:07:47. > :07:52.stuff, you come to the UK. Many small businesses may make that point
:07:53. > :07:55.as well. Let's come to the issue of why it is... And it stings for some
:07:56. > :08:03.British people, the French have a short -- shorter working week, but
:08:04. > :08:09.they are more productive than the Brits, why may that be the case?
:08:10. > :08:13.Some of it is how we measure it and some of it is the reality. If you
:08:14. > :08:17.compare Britain with France, in France people work fewer hours per
:08:18. > :08:22.week, but in total they produce about the same amount. Although
:08:23. > :08:26.British productivity per hour worked looks lower, once you look at how
:08:27. > :08:32.much work we put in, once you consider the unemployment rate of
:08:33. > :08:34.France which is a lot higher than in the UK, the productivity is not all
:08:35. > :08:39.that different. When you are measuring your business, what
:08:40. > :08:44.measures do you use? Do use productivity in a broader way or
:08:45. > :08:48.over a longer period of time? In a company like mine, a mid-market
:08:49. > :08:53.retailer relying on high street stores across the country, we do
:08:54. > :08:57.look at a lot of key performance indicators which analyse how well we
:08:58. > :09:02.are performing within the individual store. We also look at the warehouse
:09:03. > :09:06.key productivity indicators and we assess whether we are being
:09:07. > :09:11.efficient, that efficiency drive is what makes as a profitable business.
:09:12. > :09:15.In our warehouse environment, we cross train people. In the morning,
:09:16. > :09:19.particular ticketing on a Monday morning, we may have a lot of retail
:09:20. > :09:23.orders to get out of the door quickly. By Monday evening we may
:09:24. > :09:33.have a lot of mail orders coming through. People can work in one
:09:34. > :09:36.department or the other. We have times when the telephones are busy.
:09:37. > :09:38.Those members of staff may be able to go to customer service and some
:09:39. > :09:41.of them are trained between warehouse and telephone work. You
:09:42. > :09:48.run your business with intelligence, use agility and use your workforce
:09:49. > :09:53.as a valuable commodity, then we can keep the business Lane and make sure
:09:54. > :10:04.that actually our productivity levels are kept high. -- lean.
:10:05. > :10:07.Should be criticised the UK for this? Be lazy, are we still
:10:08. > :10:11.recovering from the financial crisis, maybe we have been so
:10:12. > :10:16.focused on that that we have taken our eye off the ball? We should
:10:17. > :10:20.certainly strive to be better, but one of the great things that has
:10:21. > :10:24.happened through the last recession is the way in which employers and
:10:25. > :10:29.employees really change their behaviour. If you saw the recession
:10:30. > :10:37.as deep and as big as Britain had, you would have thought unemployment
:10:38. > :10:45.would have gone to 18%, but it didn't. And employers said don't
:10:46. > :10:50.come to meet with wage rises, but I won't let anyone off. At times you
:10:51. > :10:54.have low productivity, people are working to full capacity, but the
:10:55. > :11:01.talent and skills are being retained within the company. People know how
:11:02. > :11:07.important those people can be. -- at times you have high productivity. I
:11:08. > :11:13.expect unemployment to drift up a bit, we have had some fantastically
:11:14. > :11:17.record years, it is a bit cyclical. In general we should strive for
:11:18. > :11:21.better, but let's not throw the baby out with the bath water. The
:11:22. > :11:26.relationship between unemployment and innovation, every time we get
:11:27. > :11:30.innovation, we can argue jobs get lost. What is the relationship
:11:31. > :11:36.between productivity and innovation? If you look at the gap between the
:11:37. > :11:39.UK and say the US and Germany, a third of that is to do with
:11:40. > :11:44.industries that the UK was traditionally very dependent on
:11:45. > :11:50.going downhill, oil and gas, financial services, they account for
:11:51. > :11:53.about a third, but the other two thirds seem to be the rest. The
:11:54. > :11:59.ability to innovate and the ability for the good, small businesses, the
:12:00. > :12:05.start-ups that bring innovation growth. That is a problem that the
:12:06. > :12:08.UK needs to address. Later in the programme we will be hearing more
:12:09. > :12:13.from our guests about what they think needs to be done to improve
:12:14. > :12:17.productivity, but first some thoughts from our comedy consultant
:12:18. > :12:21.who is getting to grips with the productivity puzzle by drawing on a
:12:22. > :12:28.sweet source of inspiration in this weeks talking point. It is these
:12:29. > :12:31.little fellows, we will use them to make a broad point about
:12:32. > :12:35.productivity and address the productivity decline in the UK.
:12:36. > :12:45.Maybe we well maybe I will just eat some jellybeans. My name is Richard
:12:46. > :12:54.Cullen. I am the managing director of the jellybean factory. We make
:12:55. > :13:03.gourmet jellybeans. It takes two weeks to make one jellybean. We make
:13:04. > :13:08.approximately 14 million jellybeans a day, 90% of those are exported
:13:09. > :13:12.around the world. You have to have a efficiency is and keep measuring
:13:13. > :13:17.everything at each stage in the process. Of course it will not be
:13:18. > :13:22.all about eating jellybeans. We will be talking to some experts in the
:13:23. > :13:26.area, let's hear from the London School of economic. The productivity
:13:27. > :13:31.puzzle is the name that has been given to the phenomenon we have seen
:13:32. > :13:36.since the financial crisis in the UK whereby productivity which had been
:13:37. > :13:41.growing consistently up to 2008 fell sharply and has flat lined ever
:13:42. > :13:47.since. The productivity puzzle. I wonder what flavour this is. Some of
:13:48. > :13:50.the issues we have around productivity in the UK are
:13:51. > :13:54.long-standing. We have chronic and investment in some areas that are
:13:55. > :13:59.very important for productivity growth. For example in research and
:14:00. > :14:04.develop them. What are you doing here? It is about measuring
:14:05. > :14:09.everything in the facility. Everything is up on the boards all
:14:10. > :14:14.around this room. What is the gross conundrum when you make millions of
:14:15. > :14:20.jellybeans per day? You cannot stop, we will go to 16, 18, within two
:14:21. > :14:26.years we will be at 28 million a day by the end of 2019. You must
:14:27. > :14:36.continually grow and you must continually improve. That is a
:14:37. > :14:42.bubble gum flavour, they add on the coating to this centre. I think this
:14:43. > :14:48.is Pina Colorado. I can take that back to the hour it was produced.
:14:49. > :14:52.There are orders carried out on every single line. This is the team
:14:53. > :14:56.that did every single line, the results of the orders, the actions
:14:57. > :15:00.that need to be taken and you can see the continuous improvement.
:15:01. > :15:09.Productivity is really important. I hate to see any interruption to of
:15:10. > :15:19.jellybeans! The final boxes coming off the line. -- interruption to any
:15:20. > :15:24.supply of jellybeans! So there you have it, I found no solution to the
:15:25. > :15:30.UK productivity decline, I was distracted by jellybeans being made.
:15:31. > :15:35.This productivity puzzle has widened the gap between us and other
:15:36. > :15:38.countries. In the UK they have a 15 point plan to fix the productivity
:15:39. > :15:42.decline, but all I am concerned about in terms of numbers is which
:15:43. > :15:57.one of the 36 flavours I would like to choose to eat next. Let's give it
:15:58. > :16:01.a go. Pink grapefruit it is. Our correspondent enjoying more powerful
:16:02. > :16:09.levels of productivity. Remember you can see more of his films on our
:16:10. > :16:13.website. When you look at your business, Laura, do you think here
:16:14. > :16:16.is a problem that needs to be solved or is it an ongoing issue for you to
:16:17. > :16:22.look at how much you are producing per hour? It is an ongoing issue
:16:23. > :16:27.obviously. It is particularly difficult in British retail at the
:16:28. > :16:31.moment. The introduction of the living wage has of course put
:16:32. > :16:37.pressure on all retailers, by 2020 the minimum wage will be at ?9 an
:16:38. > :16:42.hour. We have always paid at least 20% above the minimum wage. We are
:16:43. > :16:47.talking about quite highly skilled wages, they will be the minimum wage
:16:48. > :16:52.in the next few years. Which means that warehouse and retail operatives
:16:53. > :16:57.which will be the vast majority of our workforce will be quite well
:16:58. > :17:01.paid. We will actually bring upon ourselves in this country the same
:17:02. > :17:05.productivity problems that some European countries already have. At
:17:06. > :17:10.the moment we want to create good quality jobs, but we have to do that
:17:11. > :17:19.by being a financially viable business. We do not raise pay in the
:17:20. > :17:23.warehouses at the moment because we could get redundancies. That is
:17:24. > :17:28.probably the office at the country in Germany which finds it difficult
:17:29. > :17:32.to recruit the relatively low paid workers and so will invest in
:17:33. > :17:39.automation because of the fact they do not have the readily available
:17:40. > :17:44.labour force that we have. On the minimum wage, if any country
:17:45. > :17:46.introduces what is perceived to be a relatively high minimum wage, does
:17:47. > :17:52.that force companies to say I have to get a bang for my buck. These
:17:53. > :18:03.workers need to add more, focus them on the issue? Yes, is the short
:18:04. > :18:07.answer. Do companies simply respond by saying we will have fewer
:18:08. > :18:12.workers? One of the things we have had in the UK is we have had higher
:18:13. > :18:16.levels of employment. Other European countries have much higher
:18:17. > :18:20.unemployment rates. Is that the trade-off? It may be the trade-off
:18:21. > :18:26.for some companies. That would be unfortunate, but it may be an
:18:27. > :18:28.inevitability if some of these low paid workers cannot justify
:18:29. > :18:34.themselves given what I had to pay them. Is there attempt nation to
:18:35. > :18:39.think that by throwing money at a problem that that solves the problem
:18:40. > :18:44.when it does not automatically? That is a really good point. We know is
:18:45. > :18:48.just spending money on new computers or new technology can add no value
:18:49. > :18:53.at all if you do not do it in the right way. What really makes new
:18:54. > :18:57.investment is useful, whether new computers machines, it is the
:18:58. > :19:01.ability to integrate your workforce around it. Make investments in
:19:02. > :19:12.training, workforce backs ability and in new ways of working so you
:19:13. > :19:14.make the most of those things. That is something that the UK has
:19:15. > :19:17.historically been pretty good at, the US has always been pretty good
:19:18. > :19:21.at it. If you look at Germany and France, they have been historically
:19:22. > :19:25.less good at it. The issue of tax incentives to introduce automation,
:19:26. > :19:28.sometimes companies in some countries may get huge tax
:19:29. > :19:33.incentives were doing exactly that. Laura has brought at Germany, is
:19:34. > :19:38.that a positive role for the German government to play? The Germans have
:19:39. > :19:43.what we do not have and I am not encouraging us to have it, they have
:19:44. > :19:48.had high corporation taxes and you can write off the machinery quickly.
:19:49. > :19:52.That means companies have tended to invest in a huge amount of equipment
:19:53. > :19:57.displacing workers and replacing that equipment very quickly. It is
:19:58. > :20:02.not about the age of the equipment, it is the tax shield they are
:20:03. > :20:06.focused on. Something has to give and what gives is the return in
:20:07. > :20:11.investment which tends to be poor. What is the role of the government
:20:12. > :20:16.as far as you are concerned? It has put out a detailed plan, should it
:20:17. > :20:21.be as prescriptive as that? Ultimately a lot of these new ideas
:20:22. > :20:26.and ways of doing things will arise from individual businesses.
:20:27. > :20:30.Particularly they will arise from potentially disruptive businesses,
:20:31. > :20:33.possibly start-ups, possibly the smaller, more high-growth
:20:34. > :20:37.businesses. The one thing the government can do is to create the
:20:38. > :20:42.conditions where those kinds of businesses can get ahead, making it
:20:43. > :20:46.easier for businesses to get access to finance or they can grow, making
:20:47. > :20:50.sure the regulatory system does not make it difficult to introduce new
:20:51. > :20:54.technologies, to do things in different ways and to make sure that
:20:55. > :20:57.those start-ups, the innovative companies and growing companies,
:20:58. > :21:01.they can make the most of what they do, but it is not about spending
:21:02. > :21:08.money, it is about creating the right conditions. Would you agree it
:21:09. > :21:11.is about the environment, Laura? Yes, we always talk about
:21:12. > :21:15.immigration, at the moment we are talking about it in a negative
:21:16. > :21:20.fashion, but actually we find it extremely hard to recruit and employ
:21:21. > :21:24.highly skilled individuals who come from IT backgrounds, who would help
:21:25. > :21:28.us with the automation of our company. We are desperately trying
:21:29. > :21:35.to invest in our IT infrastructure, but we do not have the staff to do
:21:36. > :21:38.that. We do have a lot of retail and sales assistants, warehouse
:21:39. > :21:45.operative is available to us. We need both sides of the coin. --
:21:46. > :21:51.operatives. I would be interested to know your thoughts? The most
:21:52. > :21:55.important infrastructure point that we have made is about broadband.
:21:56. > :21:59.What has happened with broadband is people's demand for it has
:22:00. > :22:06.completely leapfrogged and they need to get ahead of the curve on that. I
:22:07. > :22:08.agree with the case on immigration. People are not bringing in
:22:09. > :22:13.immigrants because they want to pay them less, they need the skills. It
:22:14. > :22:18.is critical, the UK has always been a melting pot of people. I am an
:22:19. > :22:22.immigrant, I have lived to the 30 years, it makes the UK vibrant and
:22:23. > :22:28.successful in the long term. Thank you very much to you all. That is it
:22:29. > :22:34.from Talking Business in London, do join us next week when we will be in
:22:35. > :22:36.China talking to a new breed of companies who are finding their feet
:22:37. > :22:41.in the international marketplace. Goodbye.