Tim Wallace in the Daily Telegraph reports Mark Carney, Governor of the BoE – Bank of England – saying: “Britain’s economy has a new, lower speed limit”

Growth can only get to even modest levels before inflation takes off whereupon ‘we must ease our foot off the accelerator’

Ben Broadbent, one of Carney’s deputies, claims: “Productivity growth has slowed in just about every advanced economy, but it has been more severe in this country than in others”

Apparently, poor investment and poor productivity growth is ‘ the biggest part of the story’ – oh, and Brexit has had an impact too

As we all know, the BoE has few clubs in its bag – bank rate manipulation is one used to drive the economy further and get it out of trouble

For the past decade, extremely low interest rates have been used to prop up demand – it keeps mortgage bills down, encourages savers to spend rather than earn measly returns – and, theoretically, businesses can fund investments more cheaply

But it has failed with business investment

Carney says we had much spare capacity in the past so lack of investment didn’t have much impact on the ‘speed limit’ of the economy

But now, labour supply and capacity is near its limit – production capacity also – so productive investment is certainly needed

One’s left hoping for the best and keeping one’s fingers crossed

After all, what are central bankers paid for?

Puzzle no more about dormant national productivity – the cavalry have arrived in the form of Andy Haldane, chief economist of the BoE (Bank of England) who is to chair the government’s new ISC – Industrial Strategy Council – it’s another quango of sorts for a select few of our great and good to deal with a nagging problem that nobody seems able to resolve

Despite most experts bemoaning the UK’s lack of significant productivity improvement over the last decade, Andy claims: “The UK’s macroeconomic performance has improved dramatically since 1992 when the UK was forced out of the EU’s ERM (Exchange Rate Mechanism)” – furthermore: “The UK is now, arguably, an established Premier League team”

Then another surprise

Apparently this is  all due to “inflation targeting” by his chums at the BoE rather than the government’s efforts which: “Frequently adopted and abandoned different industrial strategies as well as other schemes to raise Britain’s productivity”

Note the role of UK managers at the coal-face merit no mention yet it is they (in our view) who determine some 80% of national productivity levels achieved – Governments can only influence the other 20% by complementing the private sector via their taxation policies and investment in education, healthcare, low-income housing, R&D and infrastructure

Why such influence by organisation level managers?

Because workers in all sectors, public or private, soon settle down to a rate of work they’re comfortable with whatever the systems and processes they’re required to follow – and it’s those systems and processes that determine most of the productivity levels achieved, both at organisation and hence national level – indeed, the famous management guru Dr Edwards Deming went so far as to claim it was systems which determined as much as 94% of an organisation’s productivity level – and the people with the power over and sole responsibility for those systems and processes are organisation managers, not their employees

Undeterred,  Andy goes on to say the ISC will provide: “An independent body to evaluate progress and develop appropriate measures of success” which suggests he has doubts about the current official data available (we wish him well)

However, to kick off his ISC reign, Andy tells us he has identified three productivity gaps facing the UK – sadly,  they’re all based on the rich, albeit flawed, trove of national statistics available to him – viz:

• Inequality between the country’s highest and lowest performing areas/ regions
• Lower labour productivity than other large rich countries
• A slowdown in productivity growth since the 2008 financial crisis

Such claims may or may not be true to a greater or lesser extent – the data on which they’re based is so full of errors, forecasts and assumptions that we’re not talking here about 1% or even 5% error margins – our guestimate is it’s more likely to be in the 30% to 50% range

And if that were not bad enough, what would Andy and his new colleagues be prompted to recommend to whom on the basis of such claims – by the sound of it, he’d be focussing on possible changes to Government policies whilst continuing his successful BoE action, and thus restricting himself and his council to a mere 20% of the problem causes

One can only hope that the value of the ISC will itself be determined by some significant improvement in some acceptably accurate measures of national productivity – and disbanded if found to be yet another ‘kicking the can down the road’ initiative

Conclusion:

Beware all economist geeks bearing their advice and solutions

Currently, we are very cynical about Andy’s prospects with the ISC

“The new prime minister will have to rise to the skills and productivity challenge, and make sure that everyone, no matter where they come from, can get a chance to have a great job”, says Anne Milton, UK Minister for Skills and Apprenticeships

The following is an article she wrote in FEWeek

I want the next prime minister to make sure the work on technical and vocational education continues to be a priority and that we build on what we have already achieved.

Significant progress has been made on our technical education reforms: the first T-levels are on track to be rolled out in 2020; the first Institutes of Technology will launch later this year; and we continue to see more people starting on apprenticeships.

I want the progress we have made to be a step change in how FE (Further Education) is viewed in this country. People are finally waking up to the need for a rebalance between FE and HE. There is much more recognition of the huge impact our further education sector plays in supporting more people to gain the skills they need to get a good job, get on the path to great careers – and for the country, boosting productivity.

This week we published the findings from our review of level 4 and 5 qualifications – or Higher Technical Qualifications – and we launched new proposals to make sure more people and employers can take advantage of them in the future.

All the evidence from our review highlights that higher technical skills (the type that many level 4 or 5 qualifications can provide) are increasingly in demand from employers, but the uptake remains worryingly low. Only 1 in 10 adults in England have studied for a qualification at this level, despite the prospect of better wages and job prospects.

The skills our economy needs now and in the future are not always aligned with the qualifications on offer and we need to make sure that we change that. Young people need to be better informed when it comes to studying for jobs and careers in key sectors such as science, technology and engineering.

Some of this is about all of us continuing to bang the drum about the benefits of technical education. We need to dispel the intellectual snobbery that still exists which dissuades some students from choosing this route in favour of a traditional academic option.

There is no overnight fix for changing the way technical and vocational education is seen by the public, but we can make sure that the qualifications and options that are available are high-quality, are valued by students, parents and employers and ultimately get more people on a path to a good, well-paid job.

That is at the heart of everything we are doing – from the introduction of new T-levels, our reforms to apprenticeships, as well as consulting on changes to post-16 qualifications at level 3 and below, and our new level 4 and 5 proposal. It is all about providing a choice of high-quality options as well as logical, clear training routes that everyone can understand.

These are once-in-a-generation reforms and while I don’t imagine that we are going to get everything right at the first time of asking, if we want to make a success of them in the long term, we need a strong sustainable and coherent technical education system. This will help unlock untapped potential and boost our economy.

The new prime minister will have to rise to this challenge if we are to have the skills we need to increase productivity and make sure that everyone, no matter where they come from can get a chance to have a great job and fulfilling life. This will be critical to the future prosperity of individuals and the country as a whole.

Conclusion: “Well said, ma’am, as far as it goes

Adrian Blundell-Wignall, former director of the OECD and professor at Sydney University, says:

• “It’s not enough to tweak R&D incentives – we, Australia, need a detailed plan that will change the whole climate for smart investment and productivity growth
• During the (recent) election, the focus was on tax cuts and “having a go”
• The Treasurer has since talked about tax incentives for R&D
• But improving productivity growth will need a broader framework of reforms to avoid our cloudy future”

Past government plans have resulted in the shrinkage of manufacturing in high-labour-cost economies:

• In Australia, from around 16% of GDP in 1975 to 6% today
• In the USA, the decline was less – 16% down to 11% of GDP

Australia made up this gap via finance and mining – and we became ‘contented and complacent’

Since China joined the WTO at the end of 2001, the commodity super-cycle pushed up the terms of trade – the real purchasing power of the income generated by domestic production was boosted by 9% of GDP, the equivalent of three full years of economic growth – the resulting feel-good factor got credit booming and house prices rising – finance and insurance now make up over 9% of GDP versus only 7% in the USA

However, mining and finance now both face headwinds:

• In mining, China’s massive investment-focused strategy has resulted in diminishing returns – investments need to earn good returns if rising debt is to be paid for – China is on the classic path for financial crises – it suffered something of a recession in 2015, and more will follow – China is slowing structurally and diversifying its resource supply – both will hurt Australia
• In finance, house prices and debt levels are too high and must unwind in the years to come, not least because of low interest rates.

And, outside these two industries, Australia’s labour productivity growth looks terrible – so much so that there’s a good case for excluding them from the measure:

• Mining, because it’s so large and heavily capital intensive – relatively few people are employed there and the huge costs in equipment are someone else’s output
• Finance, because it’s imputed from interest rate spreads

Excluding them both reveals even lower productivity growth – a meagre 0.3% p.a. over the past six years – compare that with the UK, an economy without resources, which is doing much better

So Adrian says having a plan is essential – a plan which creates an environment for more diversified and higher value-added growth covering three broad groups of firms:

• Those with strong productivity growth accompanied by significant sales at home and in foreign markets
• Large incumbent companies in the domestic market with negative productivity growth and weak penetration of foreign markets
• A large number of medium-sized companies characterised by moderate growth and a domestic sales focus.

We know digitisation and technological innovations allow some firms to quickly saturate their domestic markets – however, only those that take advantage of economies of scale by expanding into foreign markets are able to remain in the strong productivity growth group

In addition:

• Fast growers are always those firms with the highest levels of R&D expenditure
• Mergers and acquisitions (M&A) activity are a recurrent theme in their business models

R&D innovations that drive productivity do not (outside Silicon Valley) come from small start-up companies “having a go” – R&D is a huge cost activity – in the main, it comes from larger companies with barriers to the appropriation of their IP by others, and which have access to external finance, particularly equity finance, essential for risk-taking and for entering foreign markets – their ability to restructure quickly, opening and shutting down plants via M&A, is critical – small firms lack capital and resources to carry out meaningful R&D and to launch products based on it

Overall, the “plan” should be to develop a research-and-innovation culture and policy certainty – one which recognises that better education output is central to future productivity growth – one which supports an equity culture for risk taking – so it must remove barriers to domestic and cross-border M&A

The plan must also resolve the problem that while economies of scale depend on foreign sales, tax avoidance by firms also relies on cross-border activity – IP, trademark and other earning rights should not be owned by foreign subsidiaries in tax havens

Adrian thus concludes that Australian productivity requires many hard reforms rather than just tinkering with R&D tax incentives.

Adrian Blundell-Wignall is also author of ‘Globalisation and Finance at the Crossroads’

Consumer surplus is defined as the difference between the highest price a consumer would have been willing to pay and the price actually paid

It’s the unquantified value customers obtain from tangible stuff they buy – such benefits include taking less time or effort to do things, obtaining more fun and pleasure from life, having more social contacts with friends and family – all things people want, all demand growth areas, but all difficult if not impossible to measure

Nowadays, statistics on tangible outputs, GDP and national productivity levels seem to be flat-lining as we simply replace stuff, once worn out or used up, rather than add to it as in the past as more of our needs were met – and much of it, thanks to productivity improvement, would be available at lower unit prices (thus lowering GDP) if it did not incorporate significant quality and design improvements

For example:

• In 1985, about 100,000 wealthy families were willing to pay over $1,000 for a set of the Encyclopedia Britannica – some would have paid more if they had to – others would have bought if the price had been a lot less
• To calculate GDP, government statisticians looked at the market value of actual sales and multiplied the average price by the number of units sold – $100m say
• Nowadays, Britannica sells about 50,000 online subscriptions at $75 each – a total of less than $4m
• So the contribution to GDP from Britannica has dropped by 97%
• But we are better off, not worse off
• Thanks to the internet, Wikipedia and many other sources of specialised knowledge, the cost of such information consumption has fallen to near zero
• We’re getting a lot more and paying a lot less

A similar story can be told for many other modern goods and services e.g. phones, GPS, voice recorders, digital watches, portable music players, video cameras

But economists and national statisticians can’t cope with this consumer surplus – they use measures better suited to the 20th century tangible world, not the new 21st century intangible world

As Matt Hancock, ex Bank of England economist and now UK Health Secretary, suggests, the growth of free apps is benefiting consumers but potentially dampening economic figures: “I don’t think economics has caught up with the impact of zero marginal cost production (digital copies) or products that are free”

Indeed, we believe consumer surpli may well represent a vast black hole in the GDP universe and may well explain much if not all of the so-called ‘productivity puzzle’ currently afflicting most developed nations

As Milton Friedman once famously claimed: “There is no such thing as a free lunch” – consumers always pay, somehow – they have to offer something of value in return for any freebie they get – and freebie services have proliferated over the last decade

Freebie services are used to trap people into revealing private data about themselves and their buying interests, preferences and search criteria – data which is then sold on to a wide variety of suppliers enabling them to focus their marketing and selling efforts on people most likely to buy from them, thus maximising their ‘hit rates’ – so the more attractive a freebie service can be, the more people will sign on to it and divulge their data, making the service even more valuable

Freebie services are thus carrots, modern ‘hidden persuaders’, clever marketing ploys predominantly peddled by IT entrepreneurs – during the past decade alone we’ve enjoyed an increasing variety of them via the iPhone, Uber,  Airbnb and Amazon plus Google, Facebook, Twitter and WhatsApp – and the value of those services to their customers, if counted somehow, would surely have increased national GDP and so productivity levels well beyond those officially announced – perhaps even making up the claimed big differences (18% in the UK) between actual current GDP levels and trend levels

No wonder Professor Hal Varian, chief economist at Google says: “GDP has a very hard time with free”

And Professor Erik Brynjolfsson agrees: “They (freebies) add a lot of consumer welfare but do not show up in GDP”

To underline his view, Erik determined the value offered by many digital services which go unrecorded by GDP:

• He paid people to stop using freebie services and worked out a ‘reservation price’ for each one – an estimate of hidden GDP
• He found the average user:
  • Would drop Twitter for nothing
  • Valued Facebook at £85 a month
  • Wanted £470 per month to give up WhatsApp, commenting “I run my life around it – I wouldn’t be able to go to any parties on Saturdays – I wouldn’t be able to contact my babysitter”
• He concluded that: “Some of these services have become almost indispensable”

Clearly, the actual value of this consumer surplus varies per person as each of us usually has a different maximum we will pay for anything – hence it is nigh impossible to measure it for any nation as a whole

That said, some expert has already claimed that Whatsapp alone would add 3.74% to the Dutch GDP if 10 million of the country’s 17 million people used it (n.b. another statistic that gains credibility because nobody can disprove it)

Conclusions::

• GDP only records transactions at market prices – it’s completely silent on what we might be getting free
• Volume of sales may have peaked but value of benefits is forever rising
• G7 economies are currently undergoing radical changes through digitisation but economists and their performance measures are not keeping pace – they focus on tangibles that dominated growth over the last century but this new century is increasingly concerned with intangibles
• Some new measures are needed for national productivity, prosperity and well-being

“The Miracle Years Are Over – get used to It”

So announced Ruchir Sharma, a contributing opinion writer for the NEW YORK TIMES, in a well-argued article reprinted with only minor tweaks below

Across the world, economists have had to downgrade growth forecasts – but it’s not as bad as it sounds

Last year (2018) looked like the time when President Trump had delivered on his promises to strengthen the economy – his tax cuts appeared to juice growth above 3%, a pace the United States had not topped since 2005 – but the US Commerce Department has since revised 2018 growth downward to below 3%, even as forecasts for 2019 were also trending lower, toward 2%

And it’s not just an American story and Mr. Trump who won’t deliver on promises of 3, 4 or even 5% growth – across the world, economists have downgraded growth forecasts in most years since the global financial crisis of 2008:

• Defying the hopeful projections, Japan has rarely grown faster than 1%
• Europe has struggled to sustain growth faster than 1.5%
• And no one quite knows how fast China is growing, but it’s clear that there, too, the economy is slowing.

So why is the dismal science suddenly guilty of issuing overly optimistic forecasts that set the whole world up for disappointment?

Economists keep basing forecasts on trends established during the postwar miracle years, when growth was boosted by expanding populations, rising productivity and exploding debt – but population and productivity growth had stagnated by 2008, and the financial crisis put a sudden end to the debt binge

The miracle is over

Politicians often promise to bring back a golden age, but serious economists also are encouraging a similar illusion – even during the Industrial Revolution, in the 19th century, the world economy rarely grew faster than 2.5% a year, until the post-World War II baby boom began to rapidly expand the labour force – after 1950, the combination of more workers and more output per worker lifted the pace of global growth to 4% – economists came to think 4% was “normal”

Yet by the last decade, the baby boom had faded out from Europe to Japan and China – even in the United States, younger and faster-growing than most developed countries, growth in the working-age population slowed to a mere 0.2% last year from 1.2% in the early 2000s – and because fewer workers correlates directly with slower growth, that decrease implied a 1-point drop in economic growth

Roughly, economists should have expected that United States economic growth would slow to 2% from 3% — and it has – this is the new normal for the American economy – stimulus measures like the Trump tax cuts can lift growth above this path, but at best temporarily, at the risk of higher deficits and debt

For political leaders, the new age of slow growth is not a problem to solve – it’s a reality they need to accept and explain to the public – especially because it’s just not that bad:

• When populations are growing slowly, the economy doesn’t need to grow as fast to keep incomes high
• In the United States this decade, growth in GDP per capita has slowed much more gradually than the overall economy, by half a point, to an average of 1.4%
• Although Mr. Trump likes to boast about how well the United States is doing against developed rivals, Europe has been growing just as fast in per capita terms this decade
• And Japan has been growing slightly faster
• In a rich country, that is fast enough to satisfy most people
• Indeed, surveys show that Americans have rarely been more confident about the economy.

Slower growth in the working-age population also means less competition for jobs worldwide, which goes a long way to explaining why unemployment is now at record lows not only in the United States but also in the UK, Germany and Japan – surely that’s not a bad thing

Whatever politicians tell the public, their attempts to bring back the miracle years are ill-advised – growth in the economy is driven by growth in the number of workers and in output per worker, or productivity – but since the postwar surges of 1950s and 60s, productivity growth has slowed, also defying government efforts to lift it

For a time, the global economy kept motoring along anyway, fueled by a surge in debt – in the 1980s, central banks began winning the war on inflation, which allowed them to drop interest rates sharply – lower borrowing costs unleashed a worldwide binge that saw debt surging from 100% of global GDP in the late 1980s to 300% by 2008

Then the global financial crisis hit, ruining many private borrowers and lenders, many of whom are still wary of taking on new debt – and after growing faster than the economy for three decades, debt growth in many countries, including the United States, has fallen back in line with economic growth – even China, the one major country that dodged the crisis and experienced a surge in lending after 2008, is now reluctant to build on the mountain of debt that already weighs down its economy

So the postwar miracle is over – economic growth is weighed down by the baby bust and the debt hangover – yet because economists continue to base forecasts on miracle rates of growth — 4% for the world, 3% for the United States — policymakers keep fighting to hit these targets – this is very risky

There are growing calls from economists on both the right and the left to lower interest rates, or increase government spending, to boost growth even if that risks higher inflation – at the Federal Reserve, too, there is an emerging view that letting inflation rise above 2%, long considered a red line, may not be unwise

The underlying assumption seems to be that policymakers must take action because 2% GDP growth is intolerably slow

But must they?

The confidence surveys suggest Americans are quite content with record-low unemployment, benign inflation and 1.4% growth in GDP per capita – why then the rush to pump more money into the economy which risks rekindling its debt problems and inflation?

The world does not need more debt and more inflation to counter trends of declining population growth and high indebtedness

Instead, economists need to adjust their forecasts and politicians need to rethink their polices to match this reality, because trying to recreate a bygone golden age is a shaky way to build the future

An article by Peter Barker, Gui Tao and Xinhua – www.xinhuanet.com

Improving productivity, instead of the Brexit issue, is the primary task facing the British economy at the moment, says renowned British economist Jim O’Neill

“The UK being in or out of the EU (European Union) is not the most important thing facing our economic future, and I strongly believe that,” O’Neill, chairman of Chatham House think tank in London, told Xinhua in a recent exclusive interview

For O’Neill, Brexit is very much a short-term problem and he has a longer vision when he looks at economic issues. “Doing something about our productivity performance and our geographic inequality and our inter-generational inequality, these things are way more important (than Brexit),” he says

Britain has suffered a slump in its productivity growth since the financial crisis – (according to official, albeit highly suspect, national data) this slowdown has been more dramatic than that of any major Western economy, with annual growth in productivity falling from an average annual rate of about 2.3 percent before the financial crisis to 0.4 percent in the past decade

“So, even a hard Brexit, which would be very bad at first, isn’t as important as those things. The contradictory part is — why the hell would we deliberately make our productivity challenge even worse by choosing to have no trade arrangements with the single biggest economic trading zone in the world?”

“It doesn’t really make a lot of sense.”

CHALLENGE TO INDUSTRY

O’Neill cited his own industry of finance and the successful industry of auto assembly as areas where the economy could suffer after Brexit because there could be greater friction and costs to both trade and imports, which would eat into businesses’ profit margins.

In 2017, the British auto industry built 1.3 million cars for export, accounting for 12.8 percent of total British exports, according to motor industry statistics.

“The auto industry, which in modern Britain is arguably the most successful of any traditional industry, produces more cars today than 40 years ago — it would be decimated under World Trade Organization (WTO) rules,” O’Neill says

“Some of the world’s most productive auto plants are in the UK, and if we go out under WTO rules they won’t stay that way because the profit margins are too thin — I’m sure there are many other industries where that’s true.”

“My old industry of finance would have some interesting challenges,” O’Neill adds, and challenges the idea that Britain could leave the EU with a managed no-deal.

ISSUES OF GLOBALIZATION, LEFT-BEHIND PEOPLE

“There are a lot of people in the Western world who don’t believe, because of the circumstances they’ve lived in, that the past 30 years have helped them at all,” O’Neill says

“When our Chancellor of the Exchequer often says ‘we didn’t vote to make ourselves poorer,’ actually a lot of people that are poor in the UK might have voted to make themselves poorer, because they want to shake up the system.”

“They don’t really understand the degree of sacrifice they might make, but they don’t mind sacrificing growth in the UK, because they’ve not benefited from (it) anyhow,” he added.

“There’s a commonality with this (thinking) in the U.S., there’s some commonality of it in many parts of Europe, and it is clear that — as fantastic as globalization has been for China and for many other places, and for the elite world that I’ve lived through — there’s a lot of lower-income, working people that have not benefited much from the past 30 years, and it’s easy to blame globalization.”

P.S. Sadly, the powerhouse thinker Lord Jim ignores the fact that many Brexiteers voted to leave, not from a misunderstanding of the economic/ productivity implications as trotted out above but for:

• Control – over immigration
• Control – over the laws we live and work by
• Control – over who rules us – better our second rate Brits than third rate unknown foreigners with Germany driving them from the back seat
• Control – over who we can trade with, worldwide, and how

And as for making no sense ‘having no trade arrangements with the EU’:

• The EU market is stagnating whilst the rest of the world (RoW) is growing, rapidly is many parts – however, the UK is currently not allowed to address RoW markets separately
• The UK exports less than 10% of its GDP to the EU, not 50% say, so it will not be catastrophic, overall, if this % is dented – and as the EU exports more to the UK than we do to them, self-interest on both sides will ensure most of this trade will continue somehow
• In the short term, there may be import supply problems for some sectors – but that may well encourage many UK start-ups to replace some of these imports  and so be good for us in the long term
• The EU is essentially a ‘rich members club’ which insulates itself from RoW competition by a mix of tariffs and trade agreements so members become richer still – such protectionism is not only bad for EU (and UK) productivity but also morally abhorrent for putting up barriers to other nations, especially poorer nations, seeking to better themselves and so widening, not closing, prosperity gaps

An article by Maria Machancoses,  a director at Midlands Connectvestment, is fully reproduced below

For centuries, good roads have influenced the way we live, work and trade

As a nation that makes over 80% of journeys by road, and whose population is forecast to grow to 75m by 2050, investing in our ageing infrastructure is rightly at the top of the agenda.

Rather than developing proposals in isolation, roads investment is now recognised as a boost to productivity and a catalyst for regeneration.

With this in mind, economic road corridor approaches to investment, new central government spending pots and continual digital innovation are set to take centre stage

Economic corridors – Clusters

The need for the UK to forge a new place for itself in a post-Brexit world and strengthen both domestic and global market access has seen the re-emergence of the corridor approach to economic development.

While corridor-led schemes are prevailing in places like Singapore, India, China and Pakistan, ground-breaking strategic proposals are also being proposed here in the UK. They take encouragement from the continued success of the M4 corridor’s so-called ‘Silicon Alley’, the largest tech cluster in the UK outside London, turning over £10bn each year.

Plans for a London-Stansted-Cambridge corridor, a Cambridge-Milton Keynes-Oxford trade highway and Midlands Connect’s own calls for urgent, co-ordinated development along the length of the A46 are all emblematic of this trend.

By linking economic centres to each other and the rest of the UK, corridor development schemes widen access to labour pools, boost business productivity and increase the reliability and resilience of the network.

Promoting nationwide connectivity and collaboration is essential if we’re to address regional inequalities and rebalance our national economy.

Hence a Major Road Network (MRN) should be formally established by the government, following an indicative funding commitment of up to £3.5bn from 2020-2025.

Creating an additional tier of roads between the Strategic Road Network, managed and maintained by Highways England, and local authority roads, Midlands Connect and other sub-national transport bodies have called for greater influence over where this pot of money is spent, to ensure it draws on regional expertise and prioritises schemes with the highest potential for economic growth.

However, MRN funding pales into relative insignificance when compared to the second Road Investment Strategy pot – RIS2 – which is worth over £25bn. Where, when and how this will be allocated to both the delivery of regional priorities and the development of new projects, could be the most important event of the near future

Digital infrastructure

It is increasingly clear that we cannot address the mobility challenges of the future with construction alone. The greater availability of data provides us with new opportunities to better use our existing infrastructure and build networks fit for the future.

The increased uptake of electric vehicles (EVs) and roll-out of 5G networks will change the way we plan, develop and improve road networks in the coming year and beyond.

EVs aside, expect to see an acceleration in the testing of connected and autonomous vehicles and HGV platooning as 5G connectivity and the internet of things continue to revolutionise the way we travel.

As well as incorporating traditional charging points infrastructure into transport plans, we will also see further consideration of more radical technologies such as electric charging lanes, which are already in use in Sweden.

The future of our road infrastructure is inexorably linked to economic regeneration, emerging technologies and new government funding strategies.

As corridor approaches pave the way for enhanced inter-regional and international connectivity, the UK is well placed to become a more balanced, productive and innovative society

According to Philip Aldrick, Economics Editor of The Times, Britain’s dismal productivity gap with much of the developed world is due not only to lack of investment, bad management and low interest rates as previously thought

Another significant causal factor has been found

The UK’s ONS – Office for National Statistics – asked the Paris-based OECD – Organisation for Economic Cooperation and Development – to look into the consistency of national data produced by 40 different countries and they found ‘the maths used leads to misleading results’

It turns out there are differences in the adjustment of official figures used to calculate hours worked and employment levels – different countries make different adjustments for their self-employed, overseas workers, prison workers and even drug traffickers and sex workers – and for workers’ tendency to underestimate holiday time taken

For example, France marks down employees’ reported hours by nearly 20%

Hence, comparisons of national labour productivity levels – national output (GDP) divided by national hours worked – end up being ‘apples with pears’ comparisons

If the UK made the same sorts of adjustments, it is estimated their labour productivity would increase by 10%

And actual labour productivity gaps between the UK and France, Germany and the USA would be much smaller than officially thought viz:

     . 16%, not 24%, less than USA

     . 14%, not 22%, less than Germany

     . 11%, not 19%, less than France

So, whilst the finding of these errors does not explain away the apparent productivity gaps between the UK and other developed nations, nor cover the errors that abound when assembling all national productivity data, it does suggest things may not be quite as bad as once thought, at least in the UK 

So let’s leave the last words to Richard Heys, deputy chief economist at the ONS: “This research reveals some striking differences in the way different countries estimate the amount of work taking place – however, they don’t explain why productivity growth has been so stubbornly low for so long”

     .