UK

Bad bosses blamed for dragging down economy

Szu Ping Chan
Thu, 28 December 2023 

london commuters

Bad middle managers are dragging down the economy, according to a string of blue-chip bosses and analysts, who say inept executives are at the heart of Britain’s productivity problem.

FTSE 100 insurer Phoenix has identified poor middle management as one of the biggest drags on their business, while economists at the Resolution Foundation warned that Britain’s army of bad managers “stands out” globally.

It is understood that the company behind Standard Life conducts an informal exercise every year where parts of its businesses examine whether they can produce the same amount of output with a 3pc reduction in resources.


Another executive at a UK-listed firm said: “Most of the weakness is down to bad middle management. Some of them leave every year and it’s hardly noticed.”

UK pay growth has stagnated since the financial crisis amid a collapse in productivity that threatens to push the UK into a low-growth trap.

Recent research by the Chartered Management Institute branded four-fifths of British supervisors “accidental managers” because they have no formal training after being promoted.

A third of the 2,000 people surveyed also said they had left jobs because of a negative working culture.

The Resolution Foundation recently warned that firms were not as well managed in the UK as the US, with dire consequences for investment, productivity and growth.

“Rising interest rates are biting across borders, and bad taxes are found in many countries. Bad managers are, however, an area in which Britain stands out,” it said in a flagship report.

“Only a small proportion of UK firms are as well managed as the best 25pc of US firms.”

It added: “This matters for reasons beyond investment. But well-managed firms make better investment decisions, being demonstrably better at forecasting the growth of the aggregate economy and of their own firm.”

The collapse in UK productivity means that workers in the US produced 28pc more per hour than in the UK in 2019.

Economist John van Reenen added that French and Germans are also around 13pc more productive than their British counterparts.

An index on management practices compiled by respected economists, including Mr van Reenen at Stanford and the London School of Economics, has suggested that more than 50pc of the productivity gap between Britain and America can be explained by poor management.

A spokesman for Phoenix said: “We always look to operate efficiently and effectively, and to have the highest calibre of leaders at every level which we know is important to colleagues.

“Moving colleagues between different areas of our business can be really helpful to our organisation in terms of building expertise and inspiring others.

“It provides us with an opportunity to bring fresh thinking, maximise productivity and always ensure our resources, including middle management, are aligned in the best possible way. This is important to UK corporate productivity.”

The Resolution Foundation believes Britain’s fragmented investment landscape has led to a more cautious corporate culture, where a majority of overseas shareholders are often dispersed and lack engagement in the company’s fortunes because their shares are so small.

This is in contrast to many other European countries, where controlling shareholders are common.

“The ownership of UK-listed firms has become more remote – with foreign ownership of UK public firms rising from just over 10pc in 1990 to over 55pc in 2020 – and extremely dispersed,” the Foundation said.

“The UK stands out in the OECD for having one of the lowest proportion of firms with ‘blockholder’ shareholders, big enough to have an incentive and the ability to influence firm decisions.”

While the Foundation believes worker representation on boards will benefit the economy, others have warned the approach favoured by Left-wing politicians including Jeremy Corbyn, the former Labour leader, could make the productivity problem worse by forcing companies to protect jobs instead of making tough decisions.