HOW ARE WE DOING? British industrial statistics

Readers who have scanned the short piece in the 'Events' Book about Mr Digby Jones of the CBI and his recent lambasting of the Trades Unions may have come away with the impression that statistics can be used to tell many, often contradictory stories.
In our piece, Mr Jones is quoted in the 'Guardian' as claiming that British workers have a higher level of output per capita than France, Germany or Italy. This is all very interesting and encouraging - except that DTI figures for the year 2003 seem to contradict his assertion.

But, what is most interesting is what Mr Jones seems to have overlooked, forgotten or omitted - how long did it take British workers to produce their output by comparison with their foreign counterparts?!
And, the fact would seem to be about 20% longer.

So, another statistic would be that British workers work longer than most of their foreign counterparts, apart from Americans, but produce less per unit of time.
The reasons for this? Well, almost certainly not that they are slow, idle or feckless. Equally, almost certainly not because Britain is encumbered by such an horrific load of bureaucratic shackles that workers are labouring with one hand behind their backs or being trapped in old industries. It is undoubtedly a fact that other countries are also lumbered with much regulation of industry - and it is certainly harder to lay people off in France, Germany, Holland etc, etc.

A broad consensus arising from objective research shows that the main wellsprings of high productivity are tight management, high levels of investment in systems, training, and especially the capital equipment that supports workers to do their jobs efficiently. Further investigation will show that British workers in Britain perform to world class standards when well managed and backed by modern and efficient workplaces, with the best 'kit' to do the job. Further digging will reveal that some British owned companies are truly world-class, but not very many.

Fact is, however, that British workers seem to produce high performance more often than not in foreign-owned and managed companies in Britain, rather than British ones.
Further investigation will show that the levels of investment by foreign companies in Britain far outstrips that of many indigenously owned and managed ones.
Those who wish to explore some insights into why this may be should read the Redland case in the 'Good practise and cases' section of this website.

What follows here is a sort of 'story' about what is happening in Britain - the story is as best we can check, backed by an impressive range of statistics generated by respectable bodies and research institutions.

For those who are interested, some of these are listed at the end of this short chapter.

A British Tale.

Britain has a long tradition of openness to the wider world - the British have travelled and traded internationally for many centuries. Also, Britain has historically welcomed people with new skills and ideas at least as openly as most other countries.

Like many other countries, Britain has had a clearly defined class system. However, unlike some foreign nations, for example the Scandinavians, the British system produced a large underclass of poor and relatively undereducated people. The flip side of this was an elitist education system that was amongst the best in the world.

This is still the case. The top 25% of British children are educationally world leaders, but there is a larger 'tail' of underachievers than in many Asian and European countries.( data, DfES, OECD).

Also, some British universities are the best in Europe. The UK has a world class science research base.

The number of academic papers and citations produced per head is the highest amongst the G8 nations (Thompson ISI)

However, this apparent advantage has historically not been translated into practical innovation in industry and into new products and services.

The UK stands 8th in Europe, behind Germany, Ireland, Austria, Sweden, Netherlands, Finland and Spain in terms of revenues generated in industry from new or improved manufactured products. (DTI)

The UK also stands well behind all OECD countries in maintaining spend on industrial R&D.

Only the UK amongst OECD countries had a lower share of GDP spent on R&D in 2000 than in 1981. In Britain, in 2000, it was 1.9%, in the US, 2.7% and Germany, 2.5%. (OECD).

Also, the number of patents generated in Britain per million inhabitants was exceeded by the US and 15 of the largest developed countries.

The US achieved 70% more, Germany and Finland twice as many and Sweden three times.

Capital expenditure in many British companies has trailed behind the levels of many foreign competitors. This is not just a trivial statistic, as research indicates that there are strong links between R&D, related capital spend, and added value of output, productivity and eventually profitability. The needs for R&D and capital expenditure are highest in advanced, physics, chemistry and knowledge-based industries. (DTI, NIESR).

Foreign-owned manufacturing companies in Britain created 24% more gross added value per head than British counterparts and had 133% higher net capital expenditure - they also paid substantially higher wages. (NIESR)

In 2002, 40% of UK's top exporting companies were foreign-owned, and nearly 50% of Britain's gross exports come from foreign-owned companies.

In 2002, about 10% of the largest (FTSE 100) British companies were left in theonce-mighty high added-value physics and chemistry-based sectors, as opposed to some 30% in the US, and over 50% in Germany, Japan and France.
There are no large British companies left in Information technology hardware,telecommunications engineering, motor manufacturing, engineering and machinery, electrical engineering and industrial manufacturing.
There is one company each left in electronics, auto components, computer software and metals manufacturing
There are two companies left in aerospace and defence, three in pharmaceuticals and two in chemicals. (Amersham International, Britain's largest bio-tech company, was recently bought by GE of America - authors).

By comparison, there are twenty nine companies in general utility, services and retailing sectors.(Authors' research)

Productivity and added value per head is lower in Britain than in many developed countries. Furthermore, the gap between Britain and foreign competitors is not narrowing, despite government exhortation, many studies and investigations by Harvard Business School professors.

Gross Domestic Product per head in the UK came 17th out of 20 developed countries in 2000. The UK was just ahead of Portugal. Ireland came 2nd. By 2003, this figure had improved - Britain came 15th, behind the US, France, Norway and Ireland, amongst others. (Institute of Economic Affairs)

In 2003, the UK came 15th out of 21 developed countries in productivity per head, lagging the US, France and Germany, as well as many smaller countries.
(OECD).

Whilst employment is high in Britain - 7th out of 21 developed countries - there are huge disparities in earnings and high rates of relative poverty and inequality.

The earnings of CEO's of FTSE companies are about 70 times those of the average employee - and the gap is still widening. (Authors' research).

In 1999, about 28% of households with children had incomes of 60% or below the median income - and the gap is still widening.
Britain comes 13th out of 16 developed countries in the relative poverty league table. Only Greece, Portugal and the US have a worse position.(Luxembourg Income Study, 2002).

Do these statistics add up to anything? As anyone who has read 'Having Their Cake' will know, we have a rather sick feeling in the pit of our stomachs that the above does not add up to good news for the future.
There seem to be too many threads that indicate that, despite the talent and capacity for hard work of the workforce and apparently good news about the British economy - together with occasional trumpetings of schadenfreude from Treasury sources - all is not as well as it could be in British industry.

We have an uneasy feeling that Britain may be sliding ever so gently towards a high-employment, low wage, low added-value, and lowish-knowledge economy - where a large slice of the real intellectual capital that underpins modern industry is foreign controlled. This is not the kind of economy that will continue to support the excellent academic and research facilities that we currently possess - nor will it retain many of the people with the highest innovative skills.
We hope that we may be wrong, but feel that we are not.

Who might be most accountable for this state of affairs?
Two last pieces of information just may give some clues:

Maybe the people are developing impressions about the investment and financial services industries, politicians and top managers!

Sources.

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