We work: they gamble: we pay.

According to the latest Office of National Statistics (ONS) figures, UK productivity growth is the weakest it’s been since the second World War. Productivity decreased by 0.2% in the third quarter of the last financial year, leaving output per hour worked 17% lower than in 2007.

The poor performance in recent years has widened a longstanding productivity gap between the UK and other countries. UK GDP per hour is currently around 17% below the G7 average. (See March 2015 IFS data on UK productivity.)

An ONS paper (20 February 2015) measured output per hour (how much had been made or value created) by workers in 2012 and 2013. Italy measured a 9% higher value per working hour in 2012 and 2013 than in Britain. French workers produced 27% more value in both years and German workers produced 28% more value. The US produced 28% more and 31% more value across the two years.

In fact Britain has a century long history of poor investment and poor productivity compared with its main competitors.

Productivity is important because, in a capitalist system of economics, it helps determine whether you can compete with other countries when it comes to selling your goods and therefore whether or not there is a gap between the goods you buy from others and those you sell. If there is a gap, and the gap for Britain is enormous, then down goes your country's wealth. Today several significant political parties, led by the SNP, are calling for an end to austerity. But if productivity remains weak then the demand from employers that workers must work still longer hours for even less wages will increase and resources to close the gap between exports and imports will need to be found - whether or not official austerity continues.

So where can more productivity come from?
 
It comes from labour and it comes from capital. Labour can work harder and capital can invest in new machinery and technology, infra-structure etc.

So how does UK labour compare with its comparable neighbours? The OECD Better Life Index (working hours) shows the following; The % of workers who officially work over 50 hours a week in the UK is 12.3%. In the US it is 11.4%. In France 8.7%. Germany 5.6%. Belgium 4.4%. Canada 4%. The Netherlands, 0.6%. All these countries have much higher productivity than the UK. Leave aside the scabrous contracts, the instant dismissals, the comparatively very low pay 'enjoyed' by large parts of the UK workforce, the decline in real wages for 6 years and the sheer hours workers are putting in, the figures demonstrate that labour in the UK is being squeezed for the maximum production and the maximum value that can be extracted for the least possible price.

Examining the role capital plays in the UK is another matter entirely.

Another paper from the ONS (24 April 2014) gives a snapshot of capital investment as a % of Gross Domestic Product (all the goods and services that are produced in a year) across a range of countries. The UK invested 15% of its GDP in 2013. France, 20%; Germany 17%, Japan 21%, the US 19%  and India and China 36% and 49% respectively. Since the early 1900s domestic capital investment in technology, machinery and infrastructure in the UK has consistently lagged behind all the other large developed countries. The UK's shortfall of capital investment is the cause of Britain's poor productivity.

And yet British profits are very high.  British companies were the most profitable in almost 16 years in the second quarter of 2014 (Guardian 14 November 2014.) For those companies involved in the North Sea oil and gas industry, profitability in the second quarter was the lowest since records began in 1997, at 16.9%!

To continue the snapshot, profitability among both manufacturing and services sector companies improved in the second quarter of 2014 , to 12.1% and 15.6% respectively. Profitability among firms outside the financial sector and North sea activities – measured by their net rate of return – was 11.6% between April and June. It was the highest since late 1998 according to the Office for National Statistics. Yet, as we have seen, investment continued to decline.

If they don't invest in new machinery, technology and infrastructure, what do the owners, shareholders and senior managers do with their profits? They go for short term gambling either on the international stock exchanges or in the international banking, sale and loan business. Why? Because it will make them richer quicker.

And now we get closer to the very heart of the matter. The German and French capitalists are not sentimental nationalists. But they have not grown up in the shadow of the City of London, Britain's great legacy of Empire.

On the 14 March 2013 the lead story in 'City A.M.' proudly boasted
'London’s share of the UK’s economic output has just reached an all-time high of 21.9 per cent. Yes, that’s right, despite the crisis, and the City’s woes, London accounts for more of Britain’s economy that at any time in recorded history. The last time it came close was in 1911, when London was a manufacturing, shipping and imperial centre ...'

One fifth of the British economy, more powerful than ever, that does not produce anything but money, that does not invest in anything but profit, whose canvas is the whole world and whose time frame is now measured in nano seconds, dominates the UK economic system.

So; no matter how hard the workers work, how meagre their wages, how shredded their services, they will still not 'compete' with their continental and cross Atlantic neighbours in productivity. The City is the engine room of British capitalism (and not the EU as some well meaning leftists would have it.) The City blights the future of British society, grinds down labour, provides open all hours casinos and tax havens for the rich, diverting capital from investment into speculation. It will leave a big wound when it is destroyed. But amputation is still the only treatment for gangrene.