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Chancellor Philip Hammond delivered his first statement on budget policy since taking office in July and put the UK’s productivity defecit front and centre.
“The productivity gap is well known, but shocking nonetheless,” he told MPs. “We lag the US and Germany by some 30 percentage points. But we also lag France by over 20 and Italy by 8.”
“In the real world, it takes a German worker 4 days to produce what we make in 5; which means, in turn, that too many British workers work longer hours for lower pay than their counterparts.”
“Raising productivity is essential for the high-wage, high-skill economy that will deliver higher living standards for working people,” he said.
The chancellor said that investments in innovation, new technologies and infrastructure would go a long way to plugging the productivity gap. Investments will come in the form of the 'National Productivity Investment Fund', with £23bn to be spent on innovation and infrastructure over the next five years.
“We do not invest enough in research, development and innovation. As the pace of technology advances and competition from the rest of the world increases, we must build on our strengths in science and tech innovation to ensure that the next generation of discoveries is not only made here, but is also developed and produced in Britain.”
Mr. Hammond also said that he was going to inject money into venture capital funds in order to prevent UK startups from being acquired too early.
"I am taking a first step to tackle the longstanding problem of our fastest growing technology firms being snapped up by bigger companies, rather than growing to scale by injecting an additional £400m into venture capital funds through the British Business Bank, unlocking £1bn of new finance for growing firms."
The government released details last week on new investments into digital infrastructure.
Under the new package, £400m will be spent on a Digital Investment Fund to encourage new fibre broadband providers to scale up their services.
“We are particularly pleased that some of the £400m earmarked for investment in new fibre networks over the next four years will go towards helping smaller fibre providers expand their market presence,” commented Katie Gallagher, managing director of independent trade association for digital businesses in the North West, Manchester Digital. “Currently the market is dominated by a small number of large providers which limits the opportunity for innovation.”
Shaun Collins, CEO of global analyst firm, CCS Insight, added: “Incentivising investment in superfast broadband brings the gigabit society a step closer. In an increasingly digital world this investment is even more important than the investment in roads, rail and other infrastructure for the UK.”
It was also announced last week that a further £740m will be spent on trials of 5G.
Collins commented: “Any investment in the UK digital backbone is welcome and the commitment to 5G is admirable. However, realistically 5G services are unlikely to be available before 2020 in the UK. This investment only offers a small step in that direction.”