Productivity growth is the fundamental driver of long‑term economic prosperity. It shapes the success of high-performing firms, creates room for investment and real wage growth, and underpins rising living standards. Productivity supports the sustainability of public finances, determines the capacity to invest in public services, and shapes how effectively economies can respond to structural change. Ultimately, highly productive regions, cities and towns are places where business wants to invest and where prosperity can be sustained over time.
In the UK, however, productivity growth has been persistently weak since the mid‑2000s. The slowdown that followed the Global Financial Crisis proved deeper and more enduring than in most comparable advanced economies. More recently, productivity growth has remained subdued in the aftermath of the pandemic, despite a rapid acceleration of technological, and especially digital, opportunities. These trends have also been apparent in other developed economies, although the United States has recently been less affected by the productivity slowdown while performance in the UK seems weaker than elsewhere.
This underperformance, which is unusual by historical and international standards and cannot be explained by a single factor, has shaped The Productivity Institute’s (TPI) agenda in recent years. In The Productivity Agenda, TPI identified three interrelated structural weaknesses: chronic underinvestment; weak diffusion of productivity‑enhancing practices between firms and places; and institutional fragmentation that undermines coordination across policies and actors. These weaknesses reinforce one another, creating low‑productivity traps that are difficult to escape.
This prolonged period of stagnation has had profound consequences. Real wage growth has been subdued for much of the past decade; fiscal pressures have intensified as slow growth has constrained revenues while demands on public spending have risen; and regional disparities in income and opportunities have widened. Productivity weakness has also constrained the UK’s ability to confront major long‑term challenges, including the transition to net zero emissions, population ageing, the disruptive pace of technological change associated with digitalisation and artificial intelligence, and heightened geopolitical and trade uncertainty.
A consistent theme in TPI’s work is that the UK’s governance system is both highly centralised and deeply fragmented. Decision‑making authority and resources are concentrated at the centre, yet dispersed across policy domains and institutions, undermining the delivery of joined‑up, pro‑productivity outcomes. Public debate often mirrors this fragmentation, focusing on individual issues, such as skills shortages, weak investment, low innovation, poor management, planning constraints, or regional inequality, in isolation. Each is important, but none is sufficient on its own, pointing to the need for a more coherent, long‑term, joined‑up productivity strategy.
Against this backdrop, the TPI Research Programme 2023–2026 adopts a systemic view of productivity. A key insight is that productivity depends not simply on mobilising single inputs, assets or resources, but on how well those actions are combined, aligned, and coordinated. In the UK, the core challenge is not simply a lack of technology or scientific excellence, even though skill shortages and limited access to finance are critical issues in many regions. Rather, it is the difficulty of deploying resources in ways that reinforce one another across people, firms, and places.
The need for alignment has become more pressing in the current digital age. While new technologies offer substantial opportunities, their impact depends on being developed and deployed alongside other pro‑productivity interventions. Technology without skills, skills without good jobs, investment without organisational change, and innovation without diffusion all tend to deliver limited returns. This research synthesis therefore aims to identify where alignment can be strengthened and where complementarities across the productivity system offer the greatest potential for improvement.
Authors Mary O’Mahony and Bart van Ark