“Stop worrying about hairdressers”: The UK government has misdiagnosed its productivity problem

We’re going as fast as we can, here. Image: Getty.

Gonna level with you here, I have mixed feelings about this one. On the one hand, I’m a huge fan of schadenfreude, so learning that it the government has messed up in a previously unsuspected way gives me this sort of warm glow inside. On the other hand, the way it’s been screwing up is probably making the country poorer, and exacerbating the north south divide. So, mixed reviews really.

Here’s the story. This week the Centre for Cities (CfC) published a major report on Britain’s productivity problem. For the last 200 years, ever since the industrial revolution, this country has got steadily richer. Since the financial crash, though, that seems to have stopped.

The standard narrative on this has it that the problem lies in the ‘long tail’ of unproductive businesses – that is, those that produce less value per hour. Get those guys humming, the thinking goes, and the productivity problem is sorted.

But the CfC’s new report says that this is exactly wrong. The wrong tail: Why Britain’s ‘long tail’ is not the cause of its productivity problems (excellent pun, there) delves into the data on productivity in different types of businesses and different cities, to demonstrate two big points.

The first is that the long tail is the wrong place to look for productivity gains. Many low productivity businesses are low productivity for a reason:

The ability of manufacturing to automate certain processes, or the development of ever more sophisticated computer software in information and communications have greatly increased the output that a worker produces in these industries. But while a fitness instructor may use a smartphone today in place of a ghetto blaster in 1990, he or she can still only instruct one class at a time. And a waiter or waitress can only serve so many tables. Of course, improvements such as the introduction of handheld electronic devices allow orders to be sent to the kitchen more efficiently, will bring benefits, but this improvements won’t radically increase the output of the waiter.

I’d add to that: there is only so fast that people want to eat. There’s a physical limit on the number of diners any restaurant can actually feed.

At any rate, the result of this is that it’s stupid to expect local service businesses to make step changes in productivity. If we actually want to improve productivity we should focus on those which are exporting services to a bigger market.  There are fewer of these, but the potential gains are much bigger. Here’s a chart:

The y-axis reflects number of businesses at different productivities, shown on the x-axis. So bigger numbers on the left are bad; bigger numbers on the right are good. 

The question of which exporting businesses are struggling to expand productivity is what leads to the report’s second insight:

Specifically it is the underperformance of exporting businesses in cities outside of the Greater South East that causes not only divergences across the country in wages and standards of living, but also hampers national productivity. These cities in particular should be of greatest concern to policy makers attempting to improve UK productivity overall.

In other words, it turned out, again, to the north-south divide that did it. I’m shocked. Are you shocked? This is my shocked face.

The best way to demonstrate this shocking insight is with some more graphs. This first one shows the distribution of productivity in local services business in four different types of place: cities in the south east (GSE) in light green, cities in the rest of the country (RoGB) in dark green, non-urban areas in the south east in purple, non-urban areas everywhere else in turquoise.

The four lines are fairly consistent. The light green, representing south eastern cities has a lower peak on the left, meaning slightly fewer low productivity businesses, but is slightly higher on the right, meaning slightly more high productivity businesses. In other words, local services businesses in the south eastern cities are more productive than those elsewhere – but the gap is pretty narrow. 

Now check out the same graph for exporting businesses:

The differences are much more pronounced. Areas outside those south eastern cities have many more lower productivity businesses (the peaks on the left) and significantly fewer high productivity ones (the lower numbers on the right).

In fact, outside the south east, cities are actually less productive than non-urban areas. This is really not what you’d expect to see, and no a good sign for the health of the economy:

The report also uses a few specific examples to illustrate this point. Compare Reading, one of Britain’s richest medium sized cities, with Hull, one of its poorest:

Or, looking to bigger cities, here’s Bristol and Sheffield:

In both cases, the poorer northern cities are clearly lacking in high-value exporting businesses. This is a problem because these don’t just provide well-paying jobs now: they’re also the ones that have the potential to make productivity gains that can lead to even better jobs. The report concludes:

This is a major cause for concern for the national economy – the underperformance of these cities goes a long way to explain both why the rest of Britain lags behind the Greater South East and why it performs poorly on a

European level. To illustrate the impact, if all cities were as productive as those in the Greater South East, the British economy would be 15 per cent more productive and £225bn larger. This is equivalent to Britain being home to four extra city economies the size of Birmingham.

In other words, the lesson here is: stop worrying about the productivity of hairdressers. Start worrying about the productivity of Hull.


You can read the Centre for Cities’ full report here.

Jonn Elledge is the editor of CityMetric. He is on Twitter as @jonnelledge and on Facebook as JonnElledgeWrites

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The mountain in North Wales that tried to stop the UK’s blackout

Elidir Fawr, the mountain in question. Image: Jem Collins.

Last Friday, the UK’s National Grid turned to mush. Not the official term perhaps, but an accurate one after nearly one million people were left without power across the country, with hundreds more stranded at train stations – or even on trains (which isn’t nearly as fun as it might immediately sound). 

Traffic lights stopped working, back-up power failed in hospitals, and business secretary Andrea Leadsom launched an investigation into exactly what happened. So far though, the long and short of it is that a gas-fired power station in Bedfordshire failed just before 5 o’clock, followed just two minutes later by Hornsea offshore wind farm. 

However, amid the resulting chaos and inevitable search to find someone to blame for the outage, a set of mountains (yes, mountains) in North Wales were working extremely hard to keep the lights on.

From the outside, Elidir Fawr, doesn’t scream power generation. Sitting across from the slightly better known Mount Snowdon, it actually seems quite passive. After all, it is a mountain, and the last slate quarry in the area closed in 1969.

At a push, you’d probably guess the buildings at the base of the mountain were something to do with the area’s industrial past, mostly thanks to the blasting scars on its side, as I did when I first walked past last Saturday. 

But, buried deep into Elidir Fawr is the ability to generate an astounding 1,728 megawatts of electricity – enough to power 2.5 million homes, more than the entire population of the Liverpool region. And the plant is capable of running for five hours.

Dubbed by locals at the ‘Electric Mountain’, Dinorwig Power Station, is made up of 16km of underground tunnels (complete with their own traffic light system), in an excavation which could easily house St Paul’s Cathedral.

Instead, it’s home to six reversible pumps/turbines which are capable of reaching full capacity in just 16 seconds. Which is probably best, as Londoners would miss the view.

‘A Back-Up Facility for The National Grid’

And, just as it often is, the Electric Mountain was called into action on Friday. A spokesperson for First Hydro Company, which owns the generators at Dinorwig, and the slightly smaller Ffestiniog, both in Snowdonia, confirmed that last Friday they’d been asked to start generating by the National Grid.

But just how does a mountain help to ease the effects of a blackout? Or as it’s more regularly used, when there’s a surge in demand for electricity – most commonly when we all pop the kettle on at half-time during the World Cup, scientifically known as TV pick-up.

The answer lies in the lakes at both the top and bottom of Elidir Fawr. Marchlyn Mawr, at the top of the mountain, houses an incredible 7 million tonnes of water, which can be fed down through the mountain to the lake at the bottom, Llyn Peris, generating electricity as it goes.


“Pumped storage technology enables dynamic response electricity production – ofering a critical back-up facility during periods of mismatched supply and demand on the national grid system,” First Hydro Company explains.

The tech works essentially the same way as conventional hydro power – or if you want to be retro, a spruced up waterwheel. When the plant releases water from the upper reservoir, as well as having gravity on their side (the lakes are half a kilometre apart vertically) the water shafts become smaller and smaller, further ramping up the pressure. 

This, in turn, spins the turbines which are linked to the generators, with valves regulating the water flow. Unlike traditional UK power stations, which can take hours to get to full capacity, at Dinorwig it’s a matter of 16 seconds from a cold start, or as little as five if the plant is on standby.

And, designed with the UK’s 50hz frequency in mind, the generator is also built to shut off quickly and avoid overloading the network. Despite the immense water pressure, the valves are able to close off the supply within just 20 seconds. 

At night, the same thing simply happens in reverse, as low-cost, surplus energy from the grid is used to pump the water back up to where it came from, ready for another day of hectic TV scheduling. Or blackouts, take your pick.

Completed in 1984, the power station was the product of a decade of work, and the largest civil engineering project commissioned at the time – and it remains one of Europe’s largest manmade caverns. Not that you’d know it from the outside. And really, if we’ve learned anything from this, it’s that looks can be deceiving, and that mountains can actually be really damn good at making electricity. 

Jem Collins is a digital journalist and editor whose work focuses on human rights, rural stories and careers. She’s the founder and editor of Journo Resources, and you can also find her tweeting @Jem_Collins.