European workers employed by American multinationals achieve far higher levels of productivity than they do under European management at European companies, new research has shown.

Sir Howard Davies, director of the London School of Economics (LSE) and former chairman of the UK's Financial Services Authority, told an audience at Microsoft's Global Leaders Forum in Lisbon this week that European workers match the US's superior levels of labour productivity when working under American management, though the specific reasons are not understood.

In the case of Britain - which has one of the lowest productivity levels in Europe, beneath that of both France and Germany - this means workers perform up to 40 per cent better when managed by American companies than when managed by British companies.

"The difference in skills levels are important, but do not account for all the difference," he said.

In general, British workers underperform their American counterparts by about 40 per cent, and France and Germany by about 20 per cent.

The data are emerging from extensive research on the drivers of labour productivity, carried out by the LSE in partnership with consultancy McKinsey.

"US firms operating in Britain with British employees get much the same productivity as in the US," he said. "It looks like workers deliver when managed by US workers in your country."

He said that figures were influenced only slightly by the fact that British workers worked longer hours than their European counterparts in France and Germany. The US is at the top of the league table because Americans work the longest hours and also are far more productive during those hours.

The researchers were baffled by the exact reasons for the productivity discrepancy. But Sir Davies said there were some specific reasons that made the US economy more productive overall.

"There's a positive correlation between competitive intensity and management competency," he said, and the US had the most competitive and open economy in the world.

Labour market regulation also makes a difference to productivity.

Where dismissal costs are high and business is hindered by many regulations - as in Germany and France - poor managers have greater job protection and productivity suffers.