Unpicking Scotland’s recent productivity performance relative to the UK: is it all that it seems?

Productivity has once again jumped back up to the top of the news agenda.

UK productivity growth remains exceptionally weak. And as we discussed in our Budget Briefing event on Friday, the decision by the OBR to revise their forecast for productivity has had a major impact on the outlook for the UK’s public finances.

But what about productivity in Scotland? Scotland had been catching up with the UK – at least until 2015. But as we highlighted in a recent blog, the latest figures show that Scottish productivity has since slipped back, with output per hour down 4% on where it was at the end of 2015. The next set of official comparisons between Scotland and the UK will be published in January 2018.

In this blog, we unpick recent trends to see what had been driving this relative improvement in Scotland vis-à-vis the UK up until 2015. Did it reflect an improvement in Scottish efficiency per se or is something else happening at the UK level?

We show that the key reason for Scotland ‘catching up’ with the UK does not appear to be strong growth in Scottish-specific productivity (which is relatively obvious given the fragile economic growth that we have seen recently). Instead, it is because the UK has been creating jobs at a much faster rate.

Why does this have an impact on productivity? Remember, productivity is the ratio of output to labour input. So, if the number of people working is increasing faster than the growth in output, the average contribution of each worker (or hour worked) will fall. With Scotland creating fewer jobs, Scotland’s relative productivity compared to the UK will improve.

Whether or not this form of ‘catching-up’ is a good thing is open to debate.

Continue reading “Unpicking Scotland’s recent productivity performance relative to the UK: is it all that it seems?”

Productivity update

As usual, Wednesday’s labour market figures grabbed the attention of most people with the focus once again on the sustained rise in employment and fall in unemployment over the year.

However with Scotland’s labour market close to ‘record’ levels but more fragile growth in the economy overall, another set of statistics also published on Wednesday laid out the ongoing productivity challenge facing our economy. Continue reading “Productivity update”

Productivity matters more than ever!

Jeremy Peat, Visiting Professor, IPPI, University of Strathclyde. First appeared on IPPI Blog.

Despite the Brexit vote economic life goes on, and more than ever we need to work through how Scotland’s economic performance can be enhanced. Nobody knows precisely what life beyond the referendum vote will actually mean for the UK; let alone what lies ahead for Scotland. However, in order to minimise the risks within our economy, and maximise the prospects for prosperity, businesses in Scotland must be innovative and competitive. As set out in my IPPI Policy Brief some months back that implies a real focus on improving productivity across our economy.

Apparently ‘productivity’ is not a regular feature of debate in business circles. But it should be. It simply means output per unit of input – how efficient we are in producing goods and services. Overall growth in our economy, the increase in Gross Domestic Product, comes from increased productivity plus population growth. But increased affluence, increased output per head of the population, relates to productivity growth alone.

Continue reading “Productivity matters more than ever!”