GDP growth continues but more apprentices needed

Yesterday, the ONS maintained its preliminary estimate of GDP growth for the last quarter of 2013 at 0.7 per cent. This seems to confirm that the economy is now in recovery phase. However, as David Kern, chief economist at the British Chambers of Commerce (BCC), noted, it is now important to improve the quality of Britain’s recovery.

Britain’s manufacturing sector did not grow as fast as first thought in the last three months of 2013. The makers who are on the march are builders. Construction output was revised upwards from a 0.1 per cent decline when the ONS published preliminary figures at the end of January to a 0.2 per cent increase yesterday. While we do need more houses built, it is to be hoped that this revision is not an indicator of an emergent housing bubble, a perennial weakness of the British economy.

As the recovery continues, it’s time to ask: what is this recovery for? George Osborne was right to indicate in a recent speech that the UK needs more growth to come from exports and investment. There were some encouraging signs in the data announced yesterday by the ONS. Firms are spending almost 9 per cent more on new equipment and offices than a year ago.

New Demos research released today, however, reveals that firms have a long way to go to match the best performing economies in terms of number of apprenticeships. If they were to do so, we’d see up to 300,000 more apprentices in England, adding an additional £4bn a year to GDP.

Those who complete apprentices are more productive than other workers who have not. This is significant, as UK output per hour worked in 2012 was 24 percentage points below Germany and France and 29 percentage points below that of the US. We are losing the ‘global race’ in labour productivity, and this must be improved if the UK is to be as competitive as we might be. It’s clear that apprenticeships can make a significant contribution.

It is not, therefore, just new equipment and offices that businesses should be investing in but the human capital of their staff, in part through apprenticeships.

If the Conservatives are serious about being ‘the party of the workers’, as Sir John Major and Grant Shapps announced earlier this week, then they should be serious about supporting this investment. Equally, Lord Adonis leads calls on behalf of Labour for a significant increase in apprenticeships, while Gordon Birtwhistle of the Liberal Democrats is a powerful advocate of apprenticeships.

Support for growing and improving apprenticeships, consequently, transcends political parties. Business is also increasingly keen to play its part. Leading companies confirmed to Demos that their apprenticeship programmes are heavily oversubscribed. BAE have around 20 applications for every apprenticeship, British Gas around 50, KPMG have around 12, Lloyds Bank have around 60 and Live Nation have over 80.

As much as many of these apprenticeship schemes are expanding, demand for apprenticeship places far outstrips supply. The challenge now is to bring supply up the levels necessary to meet demand. The political parties say they are willing. As do a growing number of businesses. The report released today indicates how this shared goal might be achieved.