The problem with Britain’s productivity

Britain has a productivity problem – it lags behind Germany, France and the US, even Italy. But what, if anything, do we need to do about it?

Over time, says economist Gerard Lyons, productive economies outperform less productive ones, but productivity statistics are not everything. Unskilled people who in Britain are working in less productive sectors of the economy would not have a job at all if they lived in France. There, productivity figures are high – but so too is unemployment. Yet those unskilled workers act as a drag on Britain’s productivity figures. However, Britain can improve its productivity, and therefore its overall economic performance, by moving into higher quality areas of the economy. The problem is that the UK has the lowest investment, relative to GDP, of any G7 country – something which has been the case for the past 25 years.

There was a time prior to that when Britain seemed to be taking a different route – in the 1980s we expected rapid automation, bringing high productivity but fewer jobs.