It’s often said that in the long run, productivity growth is almost everything. In the case of the UK, the long run has finally arrivedby Duncan Weldon / September 5, 2017 / Leave a comment
Over the past few months the UK economic outlook has darkened. After a surprisingly upbeat performance in the second half of 2016, growth has slowed, real incomes have been squeezed and forward momentum has slipped away.
It is of course tempting, to someone who warned against the economic risks of a vote to leave the European Union, to lay the blame for our recent problems entirely at the door of Brexit. But whilst that might be intellectually satisfying, it would be to miss the bigger picture.
It’s hard to talk about the state of the British economy without discussing Brexit. But for all the sound and fury devoted to the rights and wrongs of leaving the EU, right now it’s not the ultimate determinant of our economic performance.
Productivity growth doesn’t excite the same sort of passions as Remain vs Leave, or at least not in most people. But ultimately, it’s our ability get more economic output from any given level of inputs that will determine our future prosperity. It’s often said that in the long run, productivity growth is almost everything. In the case of the UK, it seems the long run has finally arrived and it turns out Keynes was wrong about at least one thing—we aren’t all dead. Instead we have to deal with the consequences.
Over the past decade, tens of thousands of words have been written about the UK’s productivity slowdown and many hours have been spent debating the causes. But the problem—despite the insistence of economists that it is crucial—has often felt quite abstract. Indeed in some ways, poor productivity growth—at least in the short term—was a “nice” problem to have.
“In the decades before the crash, productivity grew by around 2.2 per cent a year. In the last decade it has flatlined.”
Two of the most defining characteristics of the UK’s recovery form the recession of 2008 and 2009 have been its weakness and the surprising extent to which it has been “jobs rich.” Even if they are serious question marks over the quality of many of those jobs.