7IM weekly investment note – Mind the productivity gap

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7IM’s weekly investment note – from Ben Kumar

Productivity! An absolute classic in election buzzword bingo. Everyone says it needs to be higher in the UK.

One of the most interesting bits of research in recent years comes from the Centre for Cities comparing UK cities to European cities.

 
 

Despite Leeds and Marseille having similar populations (~800,000), Leeds has an output per worker of ~£45,000, compared to Marseille’s output per worker of ~£57,000. Marseille is nearly 25% more productive.

And that’s true across regional UK cities – with most underperforming their European equivalents in terms of productivity.

Now, productivity is simple to define – it’s the amount of OUTPUT given a certain INPUT.

 
 

Higher productivity means making more widgets in a day, or scoring more goals in a match, or selling more ice cream, without hiring more workers, or buying more strikers, or hiring more ice cream vans.

So how do you raise productivity? Basically, you have to make it easier for the same people to produce more stuff! More OUTPUT, same INPUTS.

But how can you make life easier?

 
 

One way is to think about why Marseille might tick at a higher rate than Leeds.

Take a look at the population density maps below, which are on the same scale. Darker colour = more densely populated:

Source: https://human-settlement.emergency.copernicus.eu/ /7IM

 
 

Leeds is a sprawling city, whereas Marseille is compact.

Which means that 87% of Marseille’s population can get to the centre in under 30 minutes, using public transport. In Leeds, only 38% of the population can do the same.

In people terms, that’s 400,000 extra Marseillais who can get to work easily, compared to Leeds. The same pattern is true more broadly. On average, only 40% of a UK city’s population can get into town in half an hour, vs. 67% across Europe.

 
 

And that matters hugely, in lots of ways.

  • For individuals, an easy and quick commute reduces stress, which leads to higher productivity and innovation***.
  • For government investment, a more connected city wastes fewer resources; one big hospital is more efficient than ten small ones.
  • And for businesses, access to a wider talent pool in a smaller area allows rapid growth.

If the next government want to close the productivity gap, the public transport gap would be a good place to start …

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