Productivity was a frequently used word in the Chancellor of the Exchequer's presentation of his final Spring Budget. Raising productivity is a major focus and commitment - it has been placed "at the very heart of [the government's] economic plan."
UK productivity is underpinned by the capabilities of our existing and future workforce. There is a split responsibility between the government and the private sector to enable and improve these capabilities, of which the most important are the three 'productivity pillars': skills, technology and finance.
Many of the mechanisms are already in place, but our still-disappointing productivity figures indicate that there is market failure, or at least a lack of optimal results, somewhere along the line. So how can the Government oil the wheels of the productivity machine?
Skills: education, apprenticeships and career flexibility
The root of the productivity puzzle lies in education. The Chancellor is correct in addressing the need for more vocational routes that will skill UK citizens for a constantly evolving workforce. The government's renewed focus on apprenticeships is welcome, especially as employer-led initiatives allow workplaces to determine and train for skills they need.
As we approach the introduction of the apprenticeship levy, it is encouraging to see that the Budget also included a significant financial commitment to expanding technical education routes. By opening up non-university pathways we can encourage greater social mobility, particularly with more routes into high-paying careers such as accountancy.
However, to stop apprenticeships and technical education from being seen as the 'poor relative' of their traditional academic counterparts, it is vital that these courses prepare students for versatile and fulfilling careers by embedding the same transferable skills- such as communication, leadership and analytical abilities. This will allow a new generation of students the equal opportunity for flexible careers, without confining them to the remit of their study.
The government is making a good start in addressing the skills pipeline that will need to come through to drive out our productivity problems, but we must change perceptions of parents and students to see the quality of vocational education on a par with graduate study.
Technology and the future of work
While we can't yet predict exactly what it will look like, it is clear that technology will be pivotal to our future workforce and productivity. I welcome the Chancellor's commitment to technology and innovation through the announcement of £500m from the National Productivity Investment Fund to support these areas.
ACCA recently conducted research into to the views of young finance professionals, or 'Generation Next', and found that over 80% believe that changes in technology in the finance sector will enable them to focus on higher value added activity, demonstrating a perception of technology as an opportunity to advance future work.
Boosting innovation through increased financing for research and development will also help to address low productivity and support wage growth in the long-term.
A missed opportunity: supporting UK SMEs
The UK's exporting businesses will play a crucial role supporting the UK economy in the post-Brexit era and the government has missed an opportunity to use the tax system to the advantage of these businesses. Finance is the third of the 'productivity pillars', and perhaps the one where government intervention is required the most.
The Chancellor was strangely quiet on the issue of supporting and advising UK exporters. Although trade in the post-Brexit era is a daunting task, it is important that we prepare all sectors for the export of goods and services before we leave the EU.
The government's Industrial Strategy rightly identified a need to encourage UK businesses to scale-up, and to grow and diversify UK export markets substantially in the coming years. Yet for many businesses, scaling up and starting to export is just not an option--only 5% of UK SMEs currently export--and often it is financing that stands in the way.
ACCA made a submission to Government before the Budget, calling for financing measures to support SMEs in their pursuit of export opportunities. There are many levers, yet some relief measures that could be considered include a non-payment insurance product (to remove some of the risk of expansion), better education for banks about SME risk and lending covenants, and further research into non-traditional financing options such as non-bank lenders.
I hope that future budgetary measures will be taken to help exporters, particularly in relation to availability of finance and in building export capacity.
Public and private sectors must work together
To maximise productivity, the government needs the buy-in of the private sector. It is UK employers that will take apprentices and bridge their technical skills gaps, invest in and utilise cutting-edge technology, and ultimately create the robust workforce that will enable SMEs to scale-up operations. The resultant effects will benefit everyone.
Scaled-up businesses mean greater profit and thus, greater tax receipts. While the onus of implementation may fall on business, the government could step up and do more to connect these three private sector elements - skills, technology and finance - without incurring further cost.
I hope that the Chancellor continues to push the agenda of improving UK productivity, and I know that I, and ACCA, will be doing all we can to bring these elements together.