In the News Teaching Activity – how can the UK’s lacklustre productivity growth be improved? (Mar 2024)

The Economics Observatory considers how to increase UK productivity growth so that wages and living standards can grow more quickly. The article argues that a ‘long-term strategy’ is needed to replace the recent climate of uncertainty for businesses.

Poor productivity growth has been an underlying structural weakness for the UK economy since the Global Financial Crisis. If the UK had kept on its pre-GFC trend for productivity, households could have been £11,500 better off by now! Faster productivity growth is clearly important for boosting the long-term potential growth rate, for pushing up wages and ultimately improving livings standards. The Economics Observatory points to the need for fewer short-lived policy solutions to address the issue, including more well-targeted business investment, more investment in R&D, innovation & AI, more investment in education & training, more investment in housing and transport and a more devolved approach to tackle regional disparities in productivity performance. Above all, the authors believe that a more joined-up and long-term strategy is needed to create a more certain economic climate to make these investments less risky.

How can the UK revive its ailing productivity? - Economics Observatory

1 Explain, with reference to the article, the key trends in the UK’s productivity since 2009.

2 Discuss how each of these policy solutions suggested could help increase productivity growth:

• well-targeted business investment
• investment in R&D, innovation & AI
• investment in education & training
• investment in housing and transport

3 Why does the Economics Observatory argue for a ‘long term strategy’ for improving UK productivity growth?