# = pounds sterling


                                                               
                   
HM Treasury News Release
151/98                                       17 September 1998
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  STEPHEN BYERS HIGHLIGHTS DEPTH OF BRITAIN'S PRODUCTIVITY GAP


Up to date independent analysis showing Britain's low levels
of productivity was highlighted today by Chief Secretary
Stephen Byers. Speaking to a New Statesman conference on the
"Radical Century" he said:

"Tackling Britain's productivity gap is an important national
challenge. In meeting this challenge, we are confronting one
of the most fundamental longstanding weaknesses of the British
economy. 

"The Government's productivity agenda is a key part of
modernising our economy. It is not about working harder but
about working better.

"The present productivity gap means that our prosperity and
living standards are being held back. Increased productivity
is fundamental to the improvement of our living standards in
the UK and our ability to build a decent and fair society for
all."   

The figures from independent management consultants McKinsey
confirm that:
 
   * Britain has a productivity gap of 40% with the USA and
     20% with both Germany
     and France 

   * the problem effects both manufacturing and services.
     Britain's productivity is 50% behind Japan in car
     manufacturing but also 50% behind the USA in industries like
     hotels and telecoms.

   * there is very low physical investment - UK capital
      intensity is 20% behind the USA. 

   * over the last international economic cycle for every
     100 Pounds per worker invested by the UK the USA invested 140 Pounds 
     andFrance 150 Pounds.



NOTES FOR EDITORS

1. The Chief Secretary to the Treasury was speaking at a New
Statesman conference at the London School of Economics.

2.  The Treasury and the DTI are currently hosting a series of
seminars with leading business people and others on the
productivity gap, which will inform the Pre-Budget Report, the
1999 Budget and the Competitiveness White Paper. The sixth
seminar in the series on "Software and related services" was
held at Admiralty House yesterday (Wednesday 16 September).