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Disappointing Productivity – Blame the Infrastructure

Feb 13, 2018

Mark Carney, governor of the Bank of England has said in his latest news conference on 8 February, that productivity is ‘disappointing’.  When we think about the infrastructure in this country this should come as no surprise to anyone.  Whether travelling and queueing endlessly on the motorways or in the cities, waiting for trains which are late and crowded, or trying to access the internet, it is apparent to everyone that the infrastructure in this country needs serious investment.

Infrastructure can be split into two parts – physical infrastructure and digital infrastructure.  The buzzword is connectivity. Connecting cities through transport links such as rail, improved motorways and better positioned bridges.  Connecting towns through better bus systems, tram systems and metro links. Connecting people and businesses through improved digital infrastructure.  Better connectivity leads to better productivity.

Improving transport infrastructure is key to improving productivity.  According to research by the traffic information supplier Inrix, British drivers spent 31 hours in traffic jams last year. At Frazer Hall we have clients all over the country and spend many hours on the roads travelling to meetings and it is our experience that you can spend 31 hours in traffic jams in a month never mind a year!  Obviously, London was the most congested city with drivers wasting 74 hours in congestion at a cost to the city of £9.5bn, with Manchester second at 39 hours wasted and a cost to Manchester city of £345m.  We feel that not only in Manchester but in all the Northern cities, hours can be wasted in traffic jams due to roadworks, inadequate town planning and too many vehicles.  This total lack of productivity cost the UK £37.7 billion last year.  And over the course of a year, according to Inrix, motorists spent an average of £1,168 each on lost time and fuel.  Rail travel is no better.  According to Which? Magazine, rail passengers lost 3.6m hours in delays in 2016-17 and delays of at least half an hour affected 7.2m passenger journeys.  It is no wonder our productivity is ‘disappointing’.

There is also the need to improve our digital infrastructure.  In theory the digital infrastructure could alleviate the need for some physical travel – we could connect via the internet.  However, in this digital world without superfast broadband the economy cannot function like it should. The UK lags behind many nations on digital infrastructure.  A new report in August 2017 by internet measurement firm M-Lab, found that the average speed in the UK is less than a third that of Singapore and the UK is only 19th for internet speeds in Europe.  Another interesting statistic according to Chris Jenkins in Mobile Today, is that while Spain has 83% of all its premises connected to end-to-end pure fibre-optic connectivity – only 3% of the UK’s premises benefit from that.  In terms of productivity, in 2017, according to Prism an IT company, slow internet connections cost the UK up to £11 billion.

If the UK is to improve productivity there are many areas to look at but it is certainly the case that without better infrastructure, both physical and digital we are going to continue to be ‘disappointing’.