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British businesses need to up their game, says productivity watchdog. Article by Julia Bradshaw, The Telegraph.

British businesses need to up their game and be more productive or risk losing out as the country leaves the European Union, industry bosses have warned. Productivity in the UK grew by 0.9pc and 0.7pc in the final two quarters of 2017, the strongest growth since 2011.

But, the UK’s output per hour is still around a quarter behind competitors like France and Germany, meaning it takes British workers five days to produce what others achieve in four.

“The UK has a long way to go in order to catch up with our European neighbours,” said Tony Danker, chief executive of Be the Business, an industry-led organisation created to help close the UK’s productivity gap.

“With less than a year to go before we leave the EU, bosses must start now to make the most of the opportunities it presents and make Britain’s economy the most competitive in Europe.”

His comments came on the back of a survey suggesting UK companies consistently overestimate their performance relative to their peers. More than three-quarters rated themselves as more productive or equally productive as their peers, yet nearly a third had never looked at how they could improve their business practices, the survey of 1,000 small and medium-sized business owners found. 

“Evidence shows that business leaders consistently overestimate the performance of their businesses, and Brexit will only increase the demand for our firms to be more competitive,” Mr Danker added. Businesses in the Midlands were the most confident of their performance, with 83pc of those surveyed rating their productivity as equal or better than others, while those in Wales were the least, at 75pc.

Confidence among businesses, particularly those that export, reached its highest level for two years in the second quarter of 2018, according to the latest Business Confidence Monitor from the Institute of Chartered Accountants in England and Wales.

The survey, which began in 2003, suggested UK firms are enjoying improved sales and profit growth, which is leading to more capital investment and spending on R&D. Profits have risen by 4pc on average over the past 12 months, with a similar growth rate expected in the year ahead, across all types of companies, in most sectors and regions.

“There is definitely a sense of ‘the joy of spring’ in this quarter’s figures,” said Michael Izza, chief executive of the ICAEW. “Export and domestic sales growth are both improving and businesses are controlling price inflation and labour costs.” Firms that export reported stronger sales growth of 5.2pc, boosted by the weak pound, which has made their goods more competitive. Mr Izza warned, however, that bosses were struggling with a tide of rules and new legislation, including the gender pay gap and data protection regulations.

Staff turnover was another area of concern, cited as a major problem by the construction and business services sectors. “Confidence is very fragile and the upward trend could be derailed by any setback in the economic outlook,” Mr Izza said.