10/06/2016 Talking Business


10/06/2016

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Now on BBC News, it's time for Talking Business.

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Making businesses more productive is crucial to a country's long-term

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prosperity, but the UK is in its eighth year of productivity goes

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slow. Workers here are producing significantly less per hour than

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other industrialised nations. On this weeks programme we are looking

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at wide Britain lags so far behind and what can be done to put it back

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on track. Welcome to talking business from

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London, I am Tanya Beckett. Workers are 18% more productive than our

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average for our G7 partners, it is the widest gap since the 1990s. The

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British government has claimed that boosting productivity is the

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economic challenge of our age. -- 18% less productive. I have been to

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a company that is turning things around. For this car logistics

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company, productivity is at the heart of the business. We are trying

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to compete in a global economy and the competition from China, India,

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all over the world, it is getting tougher and tougher and an all of

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lot -- an awful lot of them compete on price because of the hourly rate

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they charge. If we can improve our processes and the products we offer

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our customers by using the skills and talents of our people every day,

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then we can continue to compete and grow. Unipart spent years in the

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slow lane, it is now part of an industry that is the most productive

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in the world. Back in 1993, we had the lowest value added per employee

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and the lowest stock turn of any automotive company anywhere in the

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world. We were facing an organisational life-threatening

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crisis and we either got our act together or we would have been

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completely obliterated. Here that journey was more about changing the

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culture than spending cash. We often talk to people and said grey matter

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before the greenback. Creativity before capital. There are a huge

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number of ways to improve productivity without investing any

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capital at all by harvesting the skills and talent of the people.

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Provided there is unambiguous leadership from the top and there is

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real commitment and being gauge with the whole body of knowledge, within

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12 months we can get relativity improvements anywhere between 20 and

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40% and then five and 10% on top of that forever. It is an approach that

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can be applied and measured across all areas of the economy. What you

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are measuring is the improvement in quality, the improvement in cost and

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delivery and reduction in cycle times, the elimination of waste. We

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have implemented the Unipart way into major banks, insurance

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companies, into HMRC, every single time we have done it, the quality

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has gone up, the cost has gone down and the productivity has improved.

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Could solving the British productivity puzzle be a question of

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mind over matter? To help me pick through the productivity puzzle in

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more detail, I am joined by James who is part of the Institute of

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directors, and we have a spokesperson from a mother and baby

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chain. We also have the executive director of policy and research at

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an independent charity which works to increase the innovation capacity

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in the UK. Welcome to view all. James, allow me to start with you.

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Perhaps we should define what productivity is and then get on to

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what is important about it. It measures how much better we are at

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doing something this year than we were in previous years. There are

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big problems with that. You were asking productivity per hour. A lot

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of us have a contract saying we worked 95, but we do a lot of stuff

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that is not 95, you may order Amazon books while at work. -- 925. -- 9am

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to 5pm. Is a society generally speaking, if it has good high

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productivity, is it better off? If a country can produce a lot, do a lot

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either per hour or per worker in the country, there will be more goods

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and services and it will be a wealthier country. One of the things

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we have seen in the UK is not only is the productivity lower than other

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rich countries and other G-7 countries, but we see something

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really worrying happened since the 2009 recession, the productivity gap

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between us and Germany and the US has got bigger since 2009. That is

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something that economists and business people are worried about.

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Tesco back to why that may be the case in a second, Laura you are

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running an actual business. Is productivity something you talk

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about in your business? In retail we tend to look at like-for-like sales,

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we do look at productivity in areas like warehouse distribution. But

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when you are talking about a business that relies hugely on

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well-trained staff, knowledgeable sales assistants, we are not going

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to look at the amount of parcels we get out of our stores per hour,

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because we want our sales assistants to spend time with the customer. It

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is not about a pile it high, sell it cheap attitude, it is an informed

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purchase that the consumer will make. They need to have the time put

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into it. We cannot always look at productivity. We need to look at

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EBITDA. Maybe productivity is not always an appropriate measure of

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success and what Laura is saying in some cases, parts of our business,

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it is not appropriate measure. I think that is the case. I go around

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the country and talk to companies about this. They say we do short run

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production of various goods and services. I was in Scotland and they

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produce short runs of things. That is what the customer wants. They

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want and agility, to respond to changes. If you want cheap, go to

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Turkey, but if you want high value added things with agile, flexible

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stuff, you come to the UK. Many small businesses may make that point

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as well. Let's come to the issue of why it is... And it stings for some

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British people, the French have a short -- shorter working week, but

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they are more productive than the Brits, why may that be the case?

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Some of it is how we measure it and some of it is the reality. If you

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compare Britain with France, in France people work fewer hours per

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week, but in total they produce about the same amount. Although

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British productivity per hour worked looks lower, once you look at how

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much work we put in, once you consider the unemployment rate of

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France which is a lot higher than in the UK, the productivity is not all

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that different. When you are measuring your business, what

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measures do you use? Do use productivity in a broader way or

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over a longer period of time? In a company like mine, a mid-market

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retailer relying on high street stores across the country, we do

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look at a lot of key performance indicators which analyse how well we

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are performing within the individual store. We also look at the warehouse

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key productivity indicators and we assess whether we are being

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efficient, that efficiency drive is what makes as a profitable business.

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In our warehouse environment, we cross train people. In the morning,

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particular ticketing on a Monday morning, we may have a lot of retail

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orders to get out of the door quickly. By Monday evening we may

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have a lot of mail orders coming through. People can work in one

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department or the other. We have times when the telephones are busy.

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Those members of staff may be able to go to customer service and some

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of them are trained between warehouse and telephone work. You

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run your business with intelligence, use agility and use your workforce

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as a valuable commodity, then we can keep the business Lane and make sure

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that actually our productivity levels are kept high. -- lean.

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Should be criticised the UK for this? Be lazy, are we still

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recovering from the financial crisis, maybe we have been so

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focused on that that we have taken our eye off the ball? We should

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certainly strive to be better, but one of the great things that has

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happened through the last recession is the way in which employers and

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employees really change their behaviour. If you saw the recession

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as deep and as big as Britain had, you would have thought unemployment

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would have gone to 18%, but it didn't. And employers said don't

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come to meet with wage rises, but I won't let anyone off. At times you

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have low productivity, people are working to full capacity, but the

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talent and skills are being retained within the company. People know how

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important those people can be. -- at times you have high productivity. I

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expect unemployment to drift up a bit, we have had some fantastically

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record years, it is a bit cyclical. In general we should strive for

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better, but let's not throw the baby out with the bath water. The

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relationship between unemployment and innovation, every time we get

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innovation, we can argue jobs get lost. What is the relationship

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between productivity and innovation? If you look at the gap between the

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UK and say the US and Germany, a third of that is to do with

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industries that the UK was traditionally very dependent on

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going downhill, oil and gas, financial services, they account for

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about a third, but the other two thirds seem to be the rest. The

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ability to innovate and the ability for the good, small businesses, the

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start-ups that bring innovation growth. That is a problem that the

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UK needs to address. Later in the programme we will be hearing more

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from our guests about what they think needs to be done to improve

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productivity, but first some thoughts from our comedy consultant

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who is getting to grips with the productivity puzzle by drawing on a

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sweet source of inspiration in this weeks talking point. It is these

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little fellows, we will use them to make a broad point about

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productivity and address the productivity decline in the UK.

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Maybe we well maybe I will just eat some jellybeans. My name is Richard

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Cullen. I am the managing director of the jellybean factory. We make

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gourmet jellybeans. It takes two weeks to make one jellybean. We make

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approximately 14 million jellybeans a day, 90% of those are exported

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around the world. You have to have a efficiency is and keep measuring

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everything at each stage in the process. Of course it will not be

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all about eating jellybeans. We will be talking to some experts in the

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area, let's hear from the London School of economic. The productivity

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puzzle is the name that has been given to the phenomenon we have seen

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since the financial crisis in the UK whereby productivity which had been

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growing consistently up to 2008 fell sharply and has flat lined ever

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since. The productivity puzzle. I wonder what flavour this is. Some of

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the issues we have around productivity in the UK are

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long-standing. We have chronic and investment in some areas that are

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very important for productivity growth. For example in research and

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develop them. What are you doing here? It is about measuring

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everything in the facility. Everything is up on the boards all

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around this room. What is the gross conundrum when you make millions of

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jellybeans per day? You cannot stop, we will go to 16, 18, within two

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years we will be at 28 million a day by the end of 2019. You must

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continually grow and you must continually improve. That is a

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bubble gum flavour, they add on the coating to this centre. I think this

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is Pina Colorado. I can take that back to the hour it was produced.

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There are orders carried out on every single line. This is the team

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that did every single line, the results of the orders, the actions

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that need to be taken and you can see the continuous improvement.

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Productivity is really important. I hate to see any interruption to of

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jellybeans! The final boxes coming off the line. -- interruption to any

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supply of jellybeans! So there you have it, I found no solution to the

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UK productivity decline, I was distracted by jellybeans being made.

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This productivity puzzle has widened the gap between us and other

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countries. In the UK they have a 15 point plan to fix the productivity

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decline, but all I am concerned about in terms of numbers is which

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one of the 36 flavours I would like to choose to eat next. Let's give it

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a go. Pink grapefruit it is. Our correspondent enjoying more powerful

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levels of productivity. Remember you can see more of his films on our

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website. When you look at your business, Laura, do you think here

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is a problem that needs to be solved or is it an ongoing issue for you to

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look at how much you are producing per hour? It is an ongoing issue

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obviously. It is particularly difficult in British retail at the

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moment. The introduction of the living wage has of course put

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pressure on all retailers, by 2020 the minimum wage will be at ?9 an

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hour. We have always paid at least 20% above the minimum wage. We are

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talking about quite highly skilled wages, they will be the minimum wage

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in the next few years. Which means that warehouse and retail operatives

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which will be the vast majority of our workforce will be quite well

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paid. We will actually bring upon ourselves in this country the same

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productivity problems that some European countries already have. At

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the moment we want to create good quality jobs, but we have to do that

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by being a financially viable business. We do not raise pay in the

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warehouses at the moment because we could get redundancies. That is

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probably the office at the country in Germany which finds it difficult

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to recruit the relatively low paid workers and so will invest in

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automation because of the fact they do not have the readily available

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labour force that we have. On the minimum wage, if any country

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introduces what is perceived to be a relatively high minimum wage, does

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that force companies to say I have to get a bang for my buck. These

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workers need to add more, focus them on the issue? Yes, is the short

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answer. Do companies simply respond by saying we will have fewer

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workers? One of the things we have had in the UK is we have had higher

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levels of employment. Other European countries have much higher

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unemployment rates. Is that the trade-off? It may be the trade-off

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for some companies. That would be unfortunate, but it may be an

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inevitability if some of these low paid workers cannot justify

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themselves given what I had to pay them. Is there attempt nation to

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think that by throwing money at a problem that that solves the problem

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when it does not automatically? That is a really good point. We know is

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just spending money on new computers or new technology can add no value

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at all if you do not do it in the right way. What really makes new

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investment is useful, whether new computers machines, it is the

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ability to integrate your workforce around it. Make investments in

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training, workforce backs ability and in new ways of working so you

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make the most of those things. That is something that the UK has

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historically been pretty good at, the US has always been pretty good

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at it. If you look at Germany and France, they have been historically

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less good at it. The issue of tax incentives to introduce automation,

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sometimes companies in some countries may get huge tax

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incentives were doing exactly that. Laura has brought at Germany, is

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that a positive role for the German government to play? The Germans have

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what we do not have and I am not encouraging us to have it, they have

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had high corporation taxes and you can write off the machinery quickly.

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That means companies have tended to invest in a huge amount of equipment

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displacing workers and replacing that equipment very quickly. It is

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not about the age of the equipment, it is the tax shield they are

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focused on. Something has to give and what gives is the return in

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investment which tends to be poor. What is the role of the government

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as far as you are concerned? It has put out a detailed plan, should it

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be as prescriptive as that? Ultimately a lot of these new ideas

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and ways of doing things will arise from individual businesses.

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Particularly they will arise from potentially disruptive businesses,

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possibly start-ups, possibly the smaller, more high-growth

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businesses. The one thing the government can do is to create the

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conditions where those kinds of businesses can get ahead, making it

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easier for businesses to get access to finance or they can grow, making

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sure the regulatory system does not make it difficult to introduce new

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technologies, to do things in different ways and to make sure that

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those start-ups, the innovative companies and growing companies,

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they can make the most of what they do, but it is not about spending

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money, it is about creating the right conditions. Would you agree it

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is about the environment, Laura? Yes, we always talk about

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immigration, at the moment we are talking about it in a negative

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fashion, but actually we find it extremely hard to recruit and employ

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highly skilled individuals who come from IT backgrounds, who would help

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us with the automation of our company. We are desperately trying

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to invest in our IT infrastructure, but we do not have the staff to do

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that. We do have a lot of retail and sales assistants, warehouse

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operative is available to us. We need both sides of the coin. --

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operatives. I would be interested to know your thoughts? The most

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important infrastructure point that we have made is about broadband.

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What has happened with broadband is people's demand for it has

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completely leapfrogged and they need to get ahead of the curve on that. I

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agree with the case on immigration. People are not bringing in

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immigrants because they want to pay them less, they need the skills. It

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is critical, the UK has always been a melting pot of people. I am an

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immigrant, I have lived to the 30 years, it makes the UK vibrant and

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successful in the long term. Thank you very much to you all. That is it

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from Talking Business in London, do join us next week when we will be in

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China talking to a new breed of companies who are finding their feet

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in the international marketplace. Goodbye.

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