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Failure to adopt existing technologies is leading to disparities in productivity and pay

12 November 2017

Low take-up of readily available technologies and management practices is fuelling deep-seated productivity problems in the UK, according to the Confederation of British Industry (CBI).

The striking productivity differences between businesses leads to variations in wages, opportunities and living standards for people across the UK.

The CBI believes that the answer lies in the diffusion of technology. In a new report, From Ostrich to Magpie, the CBI argues that by encouraging more businesses to behave like ‘magpies’ – picking the best tried and tested technologies available – rather than like ‘ostriches’, who are more stuck in their ways, it would be possible to reduce inequality between firms’ productivity and people’s pay. This could add over £100bn to the UK economy and support a 5% reduction in income inequality. 

Firms that fail to take up existing technologies and better management practices often struggle to embed new skills, export or allocate finance towards innovation. The CBI argues that for the first time, the Government should prioritise diffusion, ensuring that proven technologies, such as like cloud, mobile technology, e-purchasing and cyber security, can reach more businesses through the new Industrial Strategy, funding local business support where needed.

Carolyn Fairbairn, CBI Director-General, said: “While the eyes of the business world can often be on ‘the next big thing’ in cutting-edge technology, too many firms are missing out on what’s right under their nose. Failing to adopt the nuts and bolts technologies of today is leaving a gap in productivity and pay between businesses.

“In too many areas of diffusion we struggle against our international competitors, with more workers being employed by less productive firms here than in France and Germany, while by some markers we are almost a decade behind the Danes.
“The UK needs more ‘magpie’ firms with the skill and the will to find and adopt tried and trusted technologies and management practices that the best businesses showcase, and not get stuck in their ways. The impact could be a £100bn plus uplift in the economy and a narrowing of income inequality by 5%. That would mean more opportunities for people and communities in every corner of the country.

“At a time when the public purse is tight, encouraging new technology take-up is one of the most effective routes to raising productivity. With the Government committed to creating a Shared Prosperity Fund using funds previously allocated to EU membership, there are few better priorities than this for where to invest it.
“The diffusion of technology and best practices has been a serial blind spot for the Government in its attempts to solve the UK’s deep-seated productivity pains. And while there is no shortage of business support programmes from the Government, the problem for companies can be seeing the wood for the trees.

“Ultimately, getting better at diffusion of key technologies and innovation is one of the missing links in solving the UK’s productivity puzzle and should be made a national priority.

“The new Industrial Strategy is the perfect opportunity to address this blind spot in public policy. It must allocate funds to support businesses to adopt these readily available practices and technologies. Firms, supported by the CBI, with then provide the leadership to make sure best practice spreads to all regions and communities across the UK.”

Firms successful at adopting innovations – the Magpies of industry – share a number of important characteristics. Some of the characteristics centre around the market and industry conditions within which firms operate, from a firm’s exposure to international competition to the local and national policy environment affecting adoption. Availability of knowledge and capital is also key, and is in turn driven by external collaboration and effective internal allocation of capital. 

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