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As well as marking the end of ‘dry January’ for some, the final week of January 2025 was also designated as ‘National Productivity Week’ by the Productivity Institute, a government funded network of universities and research institutes. The week aims to raise awareness of, and offer solutions to, addressing the UK’s long-held productivity challenges. This is certainly needed – compared to the UK, every week seems to be national productivity week in places like Ireland, Switzerland, the USA, and Germany.[1]

The causes of the UK’s productivity deficit  to competitors are well-rehearsed – including poor or outdated infrastructure, low skills, and under-investment in R&D and innovation. There are also important spatial disparities, which are both entrenched and significant. By way of illustration …

… one of the first projects I worked on when I joined SQW 20 years ago (time flies when you’re having fun!) was a study characterising the scale and causes of the ‘productivity gap’ between the North West and the rest of the UK. I may now be older (and hopefully a little wiser), but the data indicate that very little else has changed over the past two decades on this issue: in 2005, labour productivity (measured in terms of output per hour) in the North West was 93.2% of the UK average, in 2022 (the latest data) it was … yes, remarkably, still 93.2%.[2]

Unfortunately, solutions to these challenges are not so easily identified. However, alongside the end of dry January, there are perhaps some more positive themes to reflect on as we mark ‘National Productivity Week’:

One: productivity is now firmly embedded at the centre of the economic policy agenda. A commitment to seeking to address the UK’s productivity problem – if not always succeeding in doing so – as a cornerstone of economic policy has now been consistent for the best part of a decade, and is core to the new Government’s ‘economic growth mission’.  That may seem like a truism, but this has not always been the case. Notably, as found in a review of the policy landscape by SQW over 1997-2018, an emphasis on productivity has “waxed and waned”. It fell off the policy agenda for several years – broadly from 2010 until 2015 – in the aftermath of the economic shock of the Financial Crisis, reflecting the focus on other issues such as public finances.[3] Positively, despite, or perhaps because of, the economic shocks caused by Brexit, COVID-19, the war in Ukraine, and the fallout from the September 2022 mini-budget, productivity has remained core to successive statements of economic policy by Governments of both persuasions over the past decade. The focus and emphasis has evolved (see more below), but the fundamental importance of productivity – I won’t quote Paul Krugman, but if you’re reading this, you probably know what I mean – has been accepted. This is a good thing – because while it isn’t everything, it really matters, and the UK continues to underperform.

Two: recent policy statements recognise explicitly the importance of the diffusion and adoption of new technologies, and the role of ‘growth-driving sectors’, in raising productivity performance. The relationship between innovation and productivity has long been recognised in policy statements – innovation was one of the Treasury’s ‘five drivers of productivity’ in the 2000s, one of ‘five foundations of productivity’ in the 2017 industrial strategy[4], and a ‘pillar’ in the last Government’s Plan for Growth. However, as this summary may suggest, there has been very little consistency – in fact considerable churn and change – in what this focus has meant in practice, including links to sectoral priorities, and arguably too little attention has been paid until now to the adoption and exploitation – rather than the creation – of new innovations by businesses across the economy. Further, clarity on, and targeted support for, those sectors that offer the greatest opportunity for output and productivity growth over the long-term as identified in the recent Industrial Strategy Green Paper[5], including activity to increase the adoption and diffusion of ideas, technologies, and processes in these sectors, is positive.

Three: complementary policy agendas to create a consistent and structured landscape for sub-national governance provide an opportunity to ‘move the needle’ on spatial disparities in productivity performance.  One of the contributory factors often cited for the UK’s productivity problem is our highly centralised governance model, with decisions on priorities and investments that affect productivity across the country taken in Westminster and Whitehall, not by local leaders in Wakefield, Wolverhampton, or Workington. Policies, structures and plans to seek to change this are not new – from Regional Development Agencies, to Local Enterprise Partnerships, to ‘deals’ of various different forms and at different spatial scales. However, the level of institutional and policy change and variation at sub-national level has arguably hindered, rather than helped, efforts to address sub-national productivity gaps.[6] In this context, the recent English Devolution White Paper explicitly links planned devolution to the productivity agenda, citing evidence that “devolution to capable local leaders at strategic scales has been linked to higher productivity”. While there is much to work through on what the planned Strategic Authorities look like in practice across the country – and resources will be needed alongside structures – the prospects of a more consistent landscape for local growth, some continuity and stability in the organisational architecture, and the devolution of decision-making to local places, represents an important opportunity for driving-up productivity across the country.

A week may be a long time in politics, but it’s not very long in policy, and addressing the UK’s productivity underperformance will take commitment, investment and delivery over the long-term. However, the emphasis placed on the issue by National Productivity Week, and its place at the heart of the new Government’s policy agenda is welcome. Here’s to the prospect for a few more national weeks of productivity in the years ahead … only 51 to go!

[1] See for example, Figure 3-5 here: OECD Compendium of Productivity Indicators 2024 | OECD

[2] Regional labour productivity, UK: 2022

[3] Productivity-Policy-Review.pdf

[4] Strictly, ‘ideas’, but innovation was the focus

[5] Specifically, advanced manufacturing, clean energy industries, creative industries, defence, digital and technologies, financial services, life sciences, and professional and business services. See here Invest 2035: the UK's modern industrial strategy - GOV.UK

[6] Productivity-Policy-Review.pdf​