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Invest to Grow

Invest to Grow aims to help businesses boost productivity through investment in innovation, R&D, technology & machinery. It is a GBCC led campaign that shares practical case studies, expert insight, briefing information and businesses’ views. 

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Why Invest to Grow?

The UK is facing a productivity challenge:

At a national level, the UK’s productivity is nearly 22% lower than the USA and over 25% lower than Germany’s (GDP per hour worked)

Since the 2007/08 financial crisis, productivity growth has been lower than expected in the UK and has consistently fallen below predicted trends

Confederation of British Industry (CBI) and the Productivity Leadership Group have estimated that if the UK had the same productivity distribution as Germany, this would add over £100bn to UK Gross Value Added (GVA)

 

This is even more acute in the West Midlands:

Gross Value Added per head in West Midlands Combined Authority area is £21,296 – Over £5,000 lower than the UK average

British business has historically invested less in R&D, innovation and capital expenditure than other similar nations:

UK firms invest less in R&D than most of our competitors – 1.7 per cent of GDP compared to 2.8 per cent in the United States and 2.9 per cent in Germany

The UK has the lowest average non-government capital investment of any G7 nation as a percentage of GDP

Yet the benefits from investing can be significant:

Firms which persistently invest in research and development have on average 13 percent higher productivity than non-innovative firms.

“We need to do more to ensure our excellence in discovery translates into its application in industrial and commercial practices, and so into increased productivity. The government and the private sector need to invest more in research and development (R&D). We need to be better at turning exciting ideas into strong commercial products and services.” The Industrial Strategy, UK Government, 2017

 

What do we mean by “productivity”?

Increasing investment in innovation and R&D are key tenants of the UK Government’s Industrial Strategy and the WMCA’s Local Industrial Strategy (click here for more details).

“Productivity” is generally a measure of how efficiently an economy, business or even a person, produces outputs when compared to the resources and input that went into creating it. However, it can mean different things to different people and groups.

For politicians, public sector stakeholders and economists, it generally refers to macroeconomic trends and indicators. Frequently used measures include:

GDP attempts to measure the value of a whole economy of an area and the extent to which it is growing or contracting. There are different ways of measuring it: measuring outputs (the value of goods and services produced by all sectors of the economy), measuring expenditure (goods and services purchased by consumers, government and business plus the value of exports minus imports) and measuring income (largely the value of profits and wages). It enables stakeholders and researchers to understand how the economy as a whole is performing and make international comparisons.

GVA measures the total value of income and goods and services produced by the area/sector being examined, minus the input costs that go into producing them (leaving you with the “value added” by the activity undertaken). It can allow researchers and stakeholders to compare productivity over regions, nations, sectors and other groups.

For individual businesses, productivity is generally about measures of efficiency i.e. examining a company’s outputs achieved against the resource inputs required to produce them. “Outputs” are generally products and/or services sold. “Inputs” are the staff, materials, overheads and other costs incurred in creating or providing them. The majority of businesses aim to minimise the inputs (and associated monetary and resource costs) required to produce their desired quality of output, becoming as “productive” as possible.

Increasing productivity can be achieved in a number of ways. The Invest to Grow campaign explores how investment in innovation, R&D, technology and machinery can help firms boost productivity. The GBCC’s “sister” campaign Growth Through People explores how firms can boost productivity through investing in leadership and management skills (click here for more information on Growth Through People).


Source:

An international comparison of gross fixed capital formation, ONS, November 2017
Business Productivity Review: Call for Evidence, BEIS, 2018
Corporation Tax Statistics: 2017, Analyses of Corporation Tax receipts and liabilities, Bank Levy and Bank Surcharge, HMRC, 2017
Gross domestic expenditure on research and development, UK: 2016, ONS, 2018
How Good Is Your Business Really? Raising Our Ambitions for Business Performance, Sir Charlie Mayfield on behalf of the Productivity & Leadership Group, UKCES, 2016
The Industrial Strategy: Building a Britain Fit for the Future, BEIS, 2018
The UK Innovation Survey: Headline Findings 2014 to 2016, BEIS, 2018
Regional gross value added (balanced), UK: 1998 to 2016, ONS, December 2017
International comparisons of UK productivity (ICP), first estimates: 2016, ONS, October 2017

If you would be interested in finding out more please contact Henrietta Brealey on H.Brealey@Birmingham-Chamber.com. Alternatively you can call us on 0121 607 1868