Diane Coyle
Bennett professor of public policy at the University of Cambridge and a director of the Productivity Institute

The UK fares poorly on productivity compared with some similar economies. At its broadest, productivity is how effectively an organisation (a business or government agency) or a country turns the resources it has into useful outputs. It has nothing to do with how hardworking or lazy people are; it grows when workers have better equipment and software to work with. Productivity has varied greatly between eras, growing fastest in the mid-20th century but flatlining since the 2008 financial crisis – the slowdown being most pronounced in some of the UK’s best-performing industries, such as pharmaceuticals, finance and software.

"The slowdown in productivity is most pronounced in some of our best-performing industries, such as finance and software"

Productivity trends are driven by waves of technological innovation but also by national context: does pure research get converted into commercial revenues? Is there adequate national infrastructure, or training for technical skills? Can startups thrive? Can investors rely on stable government policies? The answer to such questions in the UK is often no, hence the disappointing comparison with other rich economies.

This matters, because productivity is the measure of whether living standards are improving. It gives the economy extra output with no need for additional labour, material or capital. Bringing inflation down will be harder here than in countries that are more productive, because we will have to do more to squeeze growth in order to rein in inflation.

From The Guardian: Article