Solving the United Kingdom’s productivity puzzle in a digital age

By Jacques Bughin, Jonathan Dimson, Vivian Hunt, Tera Allas, Mekala Krishnan, Jan Mischke, Louis Chambers, and Marc Canal

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New research explains why the United Kingdom has been experiencing historically low productivity growth and what can be done to return to long-run averages. Declining labor-productivity growth characterized many advanced economies after a boom in the 1960s, but since the mid-2000s that decline has accelerated. Against that backdrop, the United Kingdom stands out as one of the worst productivity performers among its peers. Its absolute level of productivity has persistently ranked toward the bottom of a sample of advanced economies. Moreover, in the aftermath of the crisis, the United Kingdom, along with the United States, recorded one of the lowest productivity-growth rates and steepest declines in productivity growth, falling by 90 percent. Between 2010 and 2015, UK productivity growth flatlined at 0.2 percent a year, far below its long-term average of 2.4 percent from 1970 to 2007. 

Boosting productivity growth is important for all advanced economies as they navigate potential economic headwinds, such as an aging population and an ongoing shift to low-productivity services, but particularly for the United Kingdom, with an uncertain outlook for trade and investment after Brexit. 

Sidebar

Our methodology

In a new paper, Solving the United Kingdom’s productivity puzzle in a digital age (PDF–749KB), we identify key reasons for the United Kingdom’s recent weak productivity performance by analyzing cross-country, regional, and sectoral patterns as well as other decompositions of aggregate statistics (see sidebar, “Our methodology”).