Context
2.59 It is widely recognised that the United Kingdom has a ‘productivity gap’ with its main competitors France, Germany and the United States. As a result, the Government has set a Public Service Agreement (PSA) target to improve comparative rates of productivity. At a regional level, this translates into: "the economic growth objective for each region should be to raise its sustainable trend rate of growth (measured in terms of GVA per head) in comparison with its trend growth over the most recent full economic cycle." In support of this goal, the South West's Regional Economic Strategy has set a priority to ‘Support Business Productivity’ in order to address the regional and sub-regional ‘productivity gap’.
2.60 The Treasury has identified five 'drivers' of productivity: skills, investment, innovation, enterprise and competitiveness. All nations and regions benefit unequally from these drivers due to market and coordination failures. The general pattern has been for the stronger and richer regions of the economy to compound their comparative advantage by growing indigenous business and attracting new investment.
2.61 The Allsopp review recognised that research into regional productivity has been held back by the quality of the regional level data publicly available. Furthermore, as the South West is a geographically large and dispersed region, analysis at the sub-regional level is also very important. Any difficulties with examining productivity data are exacerbated at such low levels of disaggregation.