BRITISH business wastes £70 billion a year in “unproductive time” — hours that could be used to raise output if workers were managed efficiently — according to a new study.

The research, by Proudfoot, a consultancy specialising in achieving productivity gains within businesses, assesses performance on the basis of whether firms achieve 85% labour efficiency (regarded as the practical maximum).

On this basis, British firms achieved less than two-thirds of maximum efficiency, 36.6% of working hours being wasted over the 2003-5 period.

“No company can achieve 100% labour efficiency all of the time but experience shows that 85% is a realistic upper threshold,” said Simon Glynn, Proudfoot’s chief operating officer. “To achieve this, a business needs firm chief-executive support and a mix of clear, consistent strategy, management ability, work systems, technology use, people supervision, motivation and commitment.

“Amazingly, a considerable percentage of executives say they have no plan to address this: almost a quarter of those we surveyed, a third in the UK, have no current action plan. And those in the UK that do set targets are less ambitious than those in competitor economies.”

The Proudfoot study confirms the message from official productivity comparisons. Despite an improvement during 2005, British companies lag well behind their main competitors when its comes to using workers efficiently. Over the period 2003-5, there was unproductive time in UK companies of 36.6% compared with 35.8% in Germany, 32.9% in America, 32.3% in Australia and 30.8% in France.

Nick Crafts of the University of Warwick, who helped prepare the report, said France’s lead on productivity was due to higher levels of investment. The study says there is no evidence that management practices are better in France than elsewhere.

In the case of Britain, he said, productivity levels were lower than elsewhere, significantly so for the best performers.

“Looking at the UK’s productivity performance, it would be hard to say that things have got better since 1997, despite the government’s emphasis on it,” he said. “The record is no better than it was under the Tories.”

Unproductive time in UK firms is the equivalent of giving workers several weeks additional paid holiday a year, the report says. The lost output of £70 billion a year equates to 6% of gross domestic product.

Official figures suggest productivity across the whole economy has risen 1.5% over the past year. In manufacturing, though, there was a much bigger increase, of 3.2%. Economists believe manufacturers are forced to raise productivity at a faster rate due to the pressures of international competition.

Explore Economics

• Pre-Budget Report 2009

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive