Will 2024 be the year of the much needed revival in productivity growth?
Will 2024 be the year of the much needed revival in productivity growth? Will the promises of artificial intelligence, deep science and other shiny technological opportunities get translated into better productivity of British firms, the creation of more good jobs and more places across Britain benefiting? The realistic answer is: probably not – yet.
The growth rate of productivity growth in 2024 is likely come at less than 0.5% in 2024, while the rise in worker hours will end up at 0.5% at best. This will keep the growth rate of the economy in 2024 clearly below 1%. With the economy being trapped in stagflation and vulnerable to global and domestic political and economic disturbances, there is just not enough firepower to see any credible path to a sustained productivity revival happen within the year.
Productivity is a long-term work requiring commitment and perseverance. It being an election year, 2024 is more likely to be a year of promises than real action. Still, this can either be a year of fruitful transition or another one of missed opportunities. During National Productivity Week, last November, The Productivity Institute identified three key priorities to get productivity back on track:
(1) reverse the chronic under investment in our economy
(2) improve the diffusion of knowledge, innovation and best practices, and
(3) better connect pro-productivity policies and institutions.
Indeed, all long-term stuff. But wait! The prize of productivity gains can be made visible in 2024 is various ways. First, the Chancellor’s welcome replacement of the super-deduction capital allowance with a permanent scheme for full and permanent expensing can now be complemented by a commitment to long-term capital spending in the public sector, especially in health care and transportation.
Second, local skills improvement plans (LSIPs) and Help to Grow programmes should receive continued support and strengthening from any party aiming to form a new government, so that diffusion of technology and innovation will be prioritised. And, third, the commitment to levelling up and devolution should not be watered down. Without it, too few places across the UK would benefit, and growth cannot be as inclusive as is needed.
The prize from better productivity performance is too big to let 2024 go by as another year of good wishes rather than good deeds.