Productivity: firing on all cylinders

Think tank: Institute for Government

Author(s): Giles Wilkes

August 5, 2021

This report from UK think tank the Institute for Government looks at why restoring growth is a matter for every UK sector.

A narrow focus on high-value sectors will not address the UK’s £300 billion growth gap.   This report analyses the UK’s flagging productivity and growth since the 2008 financial crisis. With no one sector to blame, the paper says boosting productivity requires an economy-wide approach that includes often overlooked, high-employment sectors like hospitality, retail and administration. It debunks the idea that the UK’s recent slower growth can be explained by a decline in manufacturing – analysis shows that even if the UK had matched Germany’s performance, the slowdown would not have been much smaller. But, despite slower growth in high-value service industries like finance and information technology, many lower-value sectors eked out impressive productivity gains, showing that policy makers should no longer see such high-employment sectors as a drag on growth. A problem as large as the UK’s productivity shortfall cannot be solved solely with a focus on the cutting-edge industries championed by Boris Johnson and in the Treasury’s Plan for Growth. Ministers must also address economy-wide problems with management practices, slow adoption of technology, a lack of skilled staff, patchy infrastructure and access to finance.