The UK has a new Prime Minister who has promised to revive the nation’s economic fortunes. But he follows a succession of PMs who have pledged the same without ever managing to consistently deliver.
At the British Chambers of Commerce, we think about little else than helping businesses and our economy thrive. That’s why we have developed a plan centred around three clear priorities the government must focus on: trade, investment and productivity.
If Andy Burnham is serious about delivering growth, then he must take a fresh look at productivity:
Without improvements to UK productivity, the government will fail to hit its growth targets. But businesses are facing large-scale barriers that prevent them from maximising their productivity. From regulatory burdens, persistent skills shortages, rising health-related economic inactivity and uneven digital adoption. If the government is serious about delivering growth, it must take urgent action to address these.
Growth will only happen when firms have access to the people, skills, technology and support they need to succeed.
Getting Employment Reform Right
Businesses want to do the right thing for their workers. They support good work and fair treatment as these lead to more productive workplaces. The government’s employment reform agenda, and the implementation of the Employment Rights Act (ERA), must strike a balance. That means enhancing employment rights while enabling the flexibility and freedom that many people often want from work, and that employers need to respond to changes in demand.
We need to see the government re-assess the impact and intention of the ERA. It must work with businesses and unions to assess its potential impacts on recruitment, investment, productivity and job creation. Reforms need to be introduced in a practical and workable manner to avoid undermining productivity through overregulation. Vital issues are the proposals around reforms to zero-hours contracts, trade union rights (especially around access) and changes to unfair dismissal.
Building A Demand-led Skills System
The UK’s skills system must be modernised to reflect current and future business needs. When we get skills provision right, employers can fill roles and recruit, and learners can build the core skills that support their own development, leading to better career outcomes.
To tackle this, we need to see long-term funding for employer-led Local Skills Improvement Plans (LSIPs). They put businesses at the heart of skills planning in their areas and can ensure training providers are responding to genuine workforce needs.
We also need to see more of the promised reform to the Growth & Skills Levy to increase training flexibility. Employers want access to modular, short-term training courses in areas such as AI, digital technology and management & leadership to help meet their skills needs.
Preparing Young People for Work
To maximise productivity, we need to consider people’s needs before they enter the workforce. Young people leaving education need to be set up to enter the workforce with the qualifications, confidence, career awareness and practical experience to succeed. The government has recently made some headway on this with announcements about closer co-operation between education and business on plugging these gaps. But this must be followed through.
It is important that more careers education and experiences of work are embedded earlier and more deeply throughout the school lifecycle. This should include core skills for the future, like AI awareness and digital skills, with responsible technology use integrated across the curriculum.
Supporting Healthy and Productive Workforces
An individual can’t be productive if they are forced out of the workforce due to ill-heath. Rising long-term sickness continues to impact the labour market, creating challenges for public services, communities and businesses.
The Government should continue its ambition to create a more preventative health and welfare system. This must help people remain in work or return more quickly, supported by early intervention, better access to healthcare and stronger occupational health provision.
Additionally, employers need practical guidance, targeted funding and incentives to help them to invest in workplace health and the wellbeing of their staff.
Accelerating Digital Adoption and AI
Growth in productivity is increasingly dependent on technology, with AI adoption rapidly increasing. However, take-up remains uneven, especially across smaller firms, and sectors such as manufacturing. Government needs to work with businesses, using the Chamber Network, to deliver a targeted digital adoption programme for SMEs. This should include incentives for employers to invest in AI, as well as best practice guidance on vital areas such as secure data management.
Other digital infrastructure gaps, such as reliable high-speed internet in both rural and urban areas, must also be addressed through investment in digital connectivity. The Government must make cyber resilience a business priority across the UK, including in supply chains, with clear incentives for firms to engage.
A Pragmatic Approach to Overseas Recruitment
Where businesses are struggling to recruit talent domestically, it is important to be able to find staff from overseas. Whilst the government should focus on building a strong domestic talent pipeline first, it must allow immigration where there are genuine skills shortages. Restricting access to overseas talent without addressing domestic skills gaps risks slowing growth.
Conclusion
Improving productivity requires a joined-up approach that gives businesses the opportunity to invest in people, skills, well-being and technology. By removing barriers, productivity can rise and growth will follow.
We want to see three key actions by the new administration:
- Work with employers to build a more resilient labour market
- Support firms to embrace digitalisation and AI
- Create the labour market conditions needed for strong, stable economic growth across the UK – allowing firms to create jobs and support everyone to meet their full potential.