UK productivity slowed during the 2008-2009 global recession and continues to lag, according to a report by the UK Parliament. While UK productivity trended around 2 per cent up until that time, it has since declined to around 0.2 per cent – effectively flat-lining since 2019.

The government said that if productivity had continued to grow since the economic crisis at 2 per cent annually, it would have added £5000 per worker to the economy each year.

While the UK still ranks in fourth place measured by GDP per hour worked – it lags around 19% behind the US – and significantly trails Germany and France.

Mix messages

Why the UK has such a productivity problem is unclear. The gap between the most and least productive businesses is wider than in other advanced economies, and the centralisation of skills in London are contributing factors.

While leveraging the skills in the workforce is a significant driver for businesses, fewer businesses are investing in their business capabilities in this crucial area, according to Be the business’ most recent Productive Business Index.

The index, which focuses on small-to-medium-sized businesses also note lower levels of investment in operational efficiencies.


Businesses need to sustain and grow innovation and other advances that increase productivity, according to the consultant McKinsey. “Corporations can focus on catalysing change across their entire supply chains and ecosystems,” it said.

At the same time, businesses need to grow revenue, and reskill and upskill staff so that they can be deployed to tasks that add more value to the organisation.

Finally, it said, investment must be targeted. Long-running investment gaps related to sustainability, infrastructure, and affordable housing need to be closed,” it said. “Business can support this by making environmental, social, and governance (ESG) issues central to their decision-making processes.”

Not just machinery

The key to productivity growth is to focus on intangible assets, the consultant added. Those include intellectual property, research, technology and software, and human capital. 

“Intangibles are at the very root of productivity growth, and as they gain prominence in the knowledge and digital economies, they matter for productivity more and more,” it concluded. “This suggests that economies may trigger growth in productivity—and, indeed, long-term economic growth—by increasing investment in intangibles.”