Although economic forecasters suggest that we may have surpassed the worst of cost-of-doing-business crisis, we lag significantly behind our international peers in the productivity race. According to a Forbes article, since 2010, the UK’s Gross Domestic Product (GDP) growth rate has increased by an average of just 0.5% annually. This rate is still lower than those of the U.S., France, and Germany and falls significantly short of the UK’s growth figures recorded over the last 13 years.
So, why is UK productivity so low? What’s holding UK organisations back from achieving greater productivity gains? We have recently published a comprehensive Annual Trends Report highlighting the major challenges faced by UK organisations and their impact on productivity. Our research identifies three critical factors contributing to the UK productivity issues. Those are chiefly:
- Skills and workforce shortages
- Failure to implement new technology and AI
- Disconnected technology solutions and dependency on legacy systems
Here is why UK productivity is so low:
1- Skill and workforce shortages
Skills and workforce shortage has been a persistent and major blocker for UK organisations to achieve higher and consistent productivity, according to our eight consecutive Annual Trends Report. Due to lack of essential workers, UK businesses are consistently facing difficulties in maintaining their operations, ultimately disrupting their business continuity and objective of achieving higher productivity. Some of the key reasons behind this crisis include:
Issue with attracting and retaining talent
According to our findings attracting & retaining talent remains the top challenge, negatively impacting organisations’ ability to maintain a pool of talent. Companies consistently struggle to find and retain good employees with the skills, expertise, and knowledge crucial for their success. Due to this, they find themselves in a situation of always being behind optimum operational capacity, experiencing less efficiency, and curtailing productivity and restricting growth.
Lack of budget to maintain efficient workforce
The availability of sufficient budget to invest in hiring, retaining, and training workforce is another major hinderance in the list. Companies often face financial constraints, which hamper their ability to invest in targeted training and development programs necessary for upskilling existing employees or attracting new talent. Without adequate funding, companies struggle to offer competitive salaries and benefits, which are essential for retaining skilled workers and minimising turnover. Last but not the least, limited budgets restrict a company’s ability to employ advanced recruitment technologies or expand resource allocation towards more effective talent acquisition strategies. Consequently, these constraints not only impede an organisation’s ability to cultivate a robust and capable workforce but also perpetuate the skills gap that impedes productivity growth.
2- Failure to implement Artificial Intelligence (AI) successfully
Apart from skills and talent shortage issue, another significant barrier for low UK productivity is the failure of UK organisations to successfully implement Artificial Intelligence (AI). As AI advancements swiftly transform various sectors, companies that lag in adoption often face loss of efficiency, low output levels, limited innovation capability, and higher operational costs, ultimately leading to reduced productivity. Following are the primary reasons behind this inability:
Lack of skills and expertise
The success of AI adoption largely depends on the availability of technical skills and expertise for managing this technology. However, this doesn’t seem to be the case. In 2024, almost one in five have tried and failed to implement an AI project with 48% of these citing a lack of skills and experience to manage the project as the reason.
This shows that the UK has a significant demand-supply gap in terms of skilled professionals who can effectively utilise AI tools to drive productivity gains. As a result, UK businesses must focus on identifying skills gaps and upskilling the existing workforce to reap the benefits of AI adoption.
Limited understanding and readiness to adopt AI technology
We have found that there is general lack of preparedness and insufficient understanding among businesses regarding what is required to manage a successful AI project. We discovered that 46% of those who tried and failed to implement AI admit they didn’t really understand the business problems they thought they were addressing with AI.
We have also identified that data management is another minefield in the implementation of successful AI solution. 35% of companies claimed that they didn’t sufficiently review and clean up data before embarking on the AI projects with 29% said they underestimated the amount of data expertise and resources needed for the project.
This underscores that organisations seem to be undertaking AI projects without fully preparing and appreciating what is required for success. This may be because, in many cases, organisations have no overall AI strategy.
3- Fragmented technology solutions and lack of integration
Considering what would improve company’s current technology infrastructure and help them achieve productivity goals, the top response was ‘Better systems integration’, according to our Annual Trends Report. However, many UK businesses still rely on outdated, legacy systems that don’t communicate effectively with each other and are difficult to integrate with modern solutions. This creates information silos, which impede collaboration and lead to inefficiencies and loss of productivity.
One of the main reasons behind organisations’ reluctance to abandon legacy system is cost. The economic landscape has been quite challenging in recent years, making it difficult for companies to find budget required to upgrade their systems for better integration. Our report highlights that a staggering 51% of organisations point to cost as the main roadblock in adopting new technology for integration.
So, what can be the solution? A unified, cloud-based system.
The most effective way to overcome the challenges of fragmented technology solutions is to move towards a unified, cost-effective cloud-based system. This eliminates information silos by allowing data to be easily shared and accessed from any device or location. Cloud-based systems also offer more flexibility and scalability, making it easier for companies to upgrade their technology as needed without disrupting operations.
With OneAdvanced's range of cloud-based solutions, we can help you enhance your existing solutions with minimal new tech. You can cut down on costly downtime during installation and onboarding. Plus, as our software operates on a single platform, you can save time and reduce complications in business operations.
Conclusion
The persistent barriers to UK productivity faced by companies are multifaced, but not undefeatable. They need a unified solution which can help them with strategic investment in workforce development, innovation readiness, and technological transformation. That way can not only compete more effectively on the global stage but also create a more resilient economic environment.
At OneAdvanced, we are committed to supporting organisations in this journey, offering solutions designed to empower them achieve their full potential and drive sustainable productivity growth. We have recently released a comprehensive report that serves as a temperature check on what is happening in UK business landscape and where companies are standing in terms of technology adoption to enhance their business productivity.
So, what are you waiting for? Download your Annual Trends Report copy today!
Frequently Asked Questions (FAQs)
What is the productivity paradox in the UK?
The productivity paradox in the UK refers to the discrepancy between investments made in technology and innovation, and their impact on overall productivity. Despite increased investment in these areas, productivity growth remains low in comparison to other countries. This paradox highlights the need for businesses to strategically invest in technology, workforce development, and innovation readiness to drive sustainable productivity growth.
Where does UK rank in productivity?
According to 2023 Organisation for Economic Co-operation and Development (OECD), the UK ranked fourth among the G7 countries, still behind, United States, Germany, and France. In fact, since 2010, the UK productivity growth has been lower than these countries. This highlights the need for companies to address barriers to productivity and invest in strategies that can drive sustainable productivity growth.