BRIDGING THE PRODUCTIVITY GAP

Bridging Britain's productivity gap is the next big national challenge. This was the message today from the Chancellor Gordon Brown and the President of the Board of Trade, Margaret Beckett, as they launched a joint programme of work beginning with a seminar held today at No 11 Downing Street. This will inform the forthcoming Competitiveness White Paper and represents a first step towards the next Budget.

The Chancellor said,

"Today, Margaret Beckett and I want to set down a challenge to business, to shareholders, to Government and to employees - the challenge of working together to bridge the gap in productivity between Britain and its main competitors.

"Britain's inherited underperformance represents not only a challenge but an opportunity. We have the chance, by working together, to raise our game, to modernise and to secure the higher productivity on which higher growth, employment and living standards depends.

"To achieve this we need a new national economic purpose. And first we need to develop a clear shared understanding of the nature of the productivity gap and of what is needed to close it. This will be a key theme of our policy thinking in the coming months and I will consider seriously proposals emerging from this work in the run-up to the next Budget."

Mrs Beckett said,

"The McKinsey work echoes the emerging conclusions of my own Competitiveness UK consultation process.

"From investment to management decisions, and from the competition framework to training, both Government and companies have a role to play in boosting UK productivity.

"The Chancellor and I want to take this opportunity to hear your views on the most effective way of progressing our partnership with business, building on best practice to close the productivity gap."

Independent analysis by McKinsey, the highly respected management consultants, shows that UK productivity lags some 40 per cent behind the US and by at least 20 per cent behind (west) Germany. This large productivity gap with our main competitors goes to the heart of Britain's legacy of economic underperformance.

The Chancellor and the President today launched a programme of seminars with leading business people and others which will continue over the summer and autumn. These are intended to engage a broad range of interests and to provoke a wide- ranging debate, as well as to inform the government policy- making process.

NOTES FOR EDITORS

1. The first seminar was held today at 11 Downing Street. It addressed the productivity gap and its underlying causes in overall terms and helped set the agenda for future events. It included a presentation from McKinsey to which Sir Richard Sykes (Chairman, Glaxo Wellcome) and Adair Turner (Director-General, CBI) responded.

2. Future seminars, which will also be hosted at the DTI, will focus on specific themes such as investment, entrepreneurship, innovation and skills. Some industry- specific case studies are also planned.

3. This work will be conducted jointly by the Treasury and the DTI. Press enquiries should be directed to the Treasury (0207 270 5238) or DTI (0207 215 5981). Non- press enquiries should be directed to Richard Thomas in the Treasury (0207 270 4465) or to Harriette Knighton in the DTI (0207 215 2584).