The British economy has a serious productivity problem that will have to be addressed by the next government. According to data from the OECD (the Organisation for Economic Co-operation and Development), productivity measured as GDP per hour worked in the UK only rose 4% between 2015 and 2022. The average increase across all 43 OECD countries over the same period was 7%.
The UK is also in the bottom 30% for productivity among all OECD economies and shows no signs of improving. The latest statistics from the UK’s Office for National Statistics (ONS) suggest that in the first quarter of 2024, GDP per hour worked was only up 0.1% year on year, compared to a historic average of 1.8%. Meanwhile, GDP per worker, the other common measure of labour productivity, was up just 0.8% over the same period, compared to a historic average of 1.4%.
Extremely weak productivity leaves little room for wage increases above the rate of inflation. This hampers the government’s tax revenues, contributing to a persistent gap between spending and income: the budget deficit is currently 4.6% of GDP according to the International Monetary Fund.
