Could everything you’ve been told about Britain’s low productivity be wrong?

If you’ve been paying any attention to the news in recent years you’ll know that Britain has a manufacturing ‘problem’.

August publications such as the Financial Times and The Economist will tell you that Britain’s ‘bad productivity’ is ‘setting us back’ as a world class country.

Centers from the London School of Economics, the Economics Observatory and the National Institute of Economic and Social Research put it down to ‘underinvestment’.

And if you look at the latest statistics from the Office for National Statistics you can see it in black and white.

Hourly workers in the UK make £46.92, while in the US they make £58.88, Germany £55.83 and France £55.50. If only we can work hard and efficiently they cry.

But what if we look at those same figures as a customer. Suddenly the UK looks like the best value. All things being equal customers can buy an hour of work in the UK for less than in some of our G7 neighbours.

When customers are all over the world suddenly that ‘low productivity’ isn’t a bad thing it’s a benefit. UK looks cheap.

Now some may argue that I am oversimplifying; economists also use a second measure of production which is Gross Value Added (GVA). Simply put, the difference between the raw product and the output after the worker has turned it into something.

This measure works very well in production. You simply take the final price of the car, subtract the cost of raw materials to make that car and divide the remainder by the hours worked. If the factory is more productive and produces cars in less time then the productivity increases.

But here’s the problem with using that measure in the UK. Our economy is 81 percent services! Our service sector is an unusually high proportion of our economy. In France it is 70% and in Germany 62%.

Now the thing about human hours services is usually the product. And the amount people can charge for those hours varies by market.

If car prices go up, the prices of all cars will go up so companies can make a profit.

But in the service sector, companies can cut back significantly if the economy goes bad because hours are the only thing they sell.

So you see what I’m talking about let’s look at an example.

I have a professional services firm. One of the things my company provides to its clients is PR services. Broken down in very simple terms we might say to a client we can produce four high quality cover pieces for £X per month. And to make it easy I calculate that it will take my team 50 hours of work per month to achieve that.

Now this client is a global client and needs to achieve the same in the US. Their agency takes the same time and gets the same result but charges twice as much.

According to an economist which company is the most productive? That’s right, if you’ve been following along you’ll know that the US agency charged twice as much for their time even though the end customer result was the same.

I’m not an economist but I understand the value and I know that all things equal something half the bigger the better.

But it’s not just me who sees it, our customers do too. Despite the fact that my company is only a 15-person institution, about one-third of our clients work abroad. We don’t advertise outside the UK – they just know they’re getting better bang for their buck.

This is also why after seven years in the UK we are looking to expand into North America. We are already interested in setting up an office in Toronto.

I’m going on a test drive next month. And guess what, I’ll be taking my two ‘unproductive’ British employees with me.