I am delighted to Chair the International Advisory Board of the ESRC-funded Productivity Insights Network led by the University of Sheffield. This programme of research and engagement is an important initiative in changing the tone of the productivity debate. Raising productivity is arguably the central economic challenge in the UK, but to achieve this we need to better understand the drivers and inhibitors of productivity.
There are many different factors that influence productivity, ranging from skills, infrastructure, technology, migration, trade, and international investment as well as the regulatory and institutional environment. Each of these factors interact with each other in different ways to influence productivity growth. Over the next three years the Productivity Insights Network will unpack these factors, how they interact and play out spatially across the UK.
The complexity of the productivity puzzle is complicated further by the question of measuring productivity, especially in some knowledge-intensive sectors where information and communications technologies dominate. Yet, exactly how all of these factors and influences interact to drive productivity is not well understood. While we are able to measure productivity growth with a reasonably high degree of accuracy, we are still unsure about many of the mechanisms underpinning this growth.
Over recent years the role played by cities and regions in fostering productivity growth has also become a major focus of research and policy-thinking. International evidence suggests that the performance of countries depends crucially on the productivity growth of the country’s cities. Countries demonstrating productivity growth have typically seen strong growth in their core cities.
In the UK many of our great cities had been underperforming economically for decades, and only recently have some of these cities started to display an economic turnaround. Many of our great urban areas are very close to each other geographically, but this is not the case in terms of their connectivity, coordination and cooperation. These shortcomings have contributed to the underperformance of the UK economy, and overcoming these failures was central to the policy-agenda I led while I was at HM Treasury.
There have been some major institutional changes associated with the City-Region agenda which I spearheaded, all of which are aimed at helping cities to drive productivity growth. Achieving better local governance and decision-making capabilities is critical, both within and between our cities. There is a clear link between the devolution agenda and the productivity agenda, of which both portfolios were part of my ministerial brief.
The Productivity Insights Network puts these questions squarely on the table to advance insights on the productivity debate from a social science perspective. The UK still faces some of the largest interregional productivity variations in the industrialised world, with local area productivity differences akin to those across the whole of the Eurozone. The place-based framework adopted by the Productivity Insights Network provides a lens through which the productivity puzzle can be examined, interpreted and addressed.
Alongside the academic expertise the Productivity Insights Network is committed to engaging with government, the private sector, and civil society to diffuse evidence and insights about productivity. Serving as more than a focal point for advancing, connecting, integrating and synthesising ideas, there is a commitment to ensuring the research makes a difference by developing actionable insights with a view to raise productivity.
These are challenging times, and the Productivity Insights Network is an exciting initiative aimed at providing answers to some of our greatest societal challenges. I wish the network every success and I look forward to being part of these fascinating discussions over the coming years.