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Friday, October 30, 1998 Published at 08:49 GMT

Business: The Economy

UK 'lagging in productivity'

UK companies fail to adopt international best practice

The productivity of management and workers in the United Kingdom lags significantly behind that of their competitors, according to one of the world's foremost management consultancies.

Adair Turner: Significant opportunity for improvement
In a year-long study, the McKinsey Global Institute examined six sectors of the economy - car production, telecoms, food processing, retailing, software and hotels - and found that in most of them productivity was low.

Supermarket retailing was the only sector were the UK was top of the league.

[ image: Food retailing is one of the few areas where the UK is best]
Food retailing is one of the few areas where the UK is best
Bill Lewis, the director of McKinsey's Global Institute, said the UK was vastly underperforming its true potential.

He said better productivity would trigger much higher incomes and lower prices and "would enable (Britain) to catch up with countries such as Germany and the United States."

Car prices, for example, could fall by 10% if UK manufacturers were more productive.

Chris Giles: Britain produces 40% less than America
According to the survey, UK gross domestic product per head is 20% lower than Germany's and a staggering 40% less than that of the United States.

McKinsey blames regulatory constraints, low investment and a lack of skills for the UK's poor track record.

It says British companies have failed to adopt best global practices.

UK Chancellor of the Exchequer Gordon Brown has made productivity one of the main themes of his speeches recently.

He is expected to address the issue again in his pre-Budget report on Tuesday, while next month the Department of Trade and Industry will publish its proposals for competitiveness legislation.

However, Mr Lewis pointed out that even though UK productivity lagged behind that of Germany and France, it was way ahead in terms of structural changes of its labour and capital markets.

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