INDUSTRY and union leaders have drawn up plans to tackle the UK's "substantial" productivity gap with its major competitors. The TUC and the CBI have set out priorities for raising skills and increasing investment.

The two sides of industry agreed that reform was badly needed, but said the gap would only be bridged if employers and employees worked together.

The report, drawn up after six months of work between the two groups, was welcomed by the Government.

Chancellor Gordon Brown and Trade and Industry Secretary Patricia Hewitt backed the proposal for a permanent CBI-TUC productivity group, which they said would be a useful sounding board for policy development.

John Monks, general secretary of the TUC, said: "There is no doubt that Britain suffers from a big productivity gap.

"There is no quick fix, but we will only bridge the gap if employers and employees work together."

Digby Jones, the director general of the CBI, said: "The gap between UK productivity and that of our main European competitors has been a serious problem for decades.

"It is vital we address it."

Meanwhile, Education and Skills Secretary Estelle Morris said that the UK would receive a £10bn boost if productivity increased by 0.1 per cent a year for the next decade.

She said learning was the key to closing the productivity gap between the UK and its international competitors.

Speaking on the tenth anniversary of the Investors in People initiative, which was launched to try to improve business performance and develop workers' skills, Ms Morris said: "Only by raising the skill levels of our workforce and investing in training and development can we begin to match the levels of the best in the world."

Ruth Spellman, chief executive of the initiative, said lack of training and skills shortages were the main factors behind the UK's lack of competitiveness. "The major challenge for companies in the UK is to recognise the link between staff performance and improved productivity and to invest in our most important resource our people."

US productivity is 42 per cent higher than in the UK, while in France and Germany it is 14 per cent and seven per cent higher respectively. The Government said its Pre-Budget Report next month would have as a central theme its continuing drive to improve productivity