A ‘chasm’ in productivity across the UK regions is holding back the economy, the chief economist of the Institute of Directors (IoD) has claimed.

Tej Parikh said latest figures from the Office for National Statistics (ONS) emphasised the need for significant investment outside London and the South East – the only two UK regions to sit above the national average for productivity, measured in output per hour.

While London was 31.6 per cent above the national average in 2018 and the South East 9.1 per cent, the North West was 8.4 per cent below, the ONS found.

The North East came out 13.5 per cent and Yorkshire and the Humber 16.5 per cent below the average in a table propped up by Wales (17.2 per cent).

Scotland came third in the table, 2.4 per cent below the average.

Mr Parikh said Government action to ‘level up’ the regions ‘could not come soon enough’.

“The chasm in productivity across the UK’s regions and nations is holding back our economy,” he said.

“Without significant investment outside London and the South East, the rest of the country will continue to lag behind, eating into the UK’s overall potential.

“More funding should go toward developing our regional skills systems and enhancing the role our world-class universities play in local economies can be starting point.

“Upgrading existing local road and rail links and our digital infrastructure must be a priority, alongside enhancing connections between our towns and cities.

“The benefits of big-ticket infrastructure improvements, although crucial, won’t be felt immediately. We need greater regional investment incentives for new and growing firms to help catalyse innovation and jobs growth in the here and now.”

The IoD’s Cumbrian chair, Barry Leahey, said better support for help businesses boost productivity – in particular small and medium sized enterprises (SMEs) – would be key to improving regional growth.

“Through my work with Be the Business and the IoD, I have seen first-hand the positive impact on a community when local businesses are given that little bit of support they need to help them thrive,” he said.

“If the regions are to level up, local businesses need to become engines of local growth."

Tony Danker, chief executive of Be the Business said raising productivity ‘is the single best way to increase wages and living standards’.

“It is not just a case of London and the South East being productive and the rest of the country lagging behind,” he said.

“Within every region there are places where large numbers of firms have improved their performance. We can and must replicate their success in every region. This will unleash economic growth and put the country in great shape to compete on the global stage.”

Chancellor Sajid Javid has promised a spending spree in his spring budget to help “left behind” parts of the country, such as the North.

He, Prime Minister Boris Johnson and senior Government figures all pledged a commitment to closing the socioeconomic North-South divide before and after December’s General Election.