There is much debate and little agreement about the reasons for the UK’s productivity woes. The Productivity Puzzle Since the onset of the recession, productivity growth in the UK has been particularly sluggish. Over the course of four decades up to 2008, labour productivity – the amount of gross value added (GVA) generated per hour worked – grew at a remarkably stable rate of more than 2% per year. On the face of it, the UK’s productivity puzzle is straight forward enough. The BOE concludes that it's largely due to low capital investment and also inefficient resource allocation where workers are not moving from low to high productivity sectors. Andy Haldane, the Bank’s Chief Economist, explores possible reasons for why productivity growth has consistently been underperforming in relation to expectations – the so-called ‘productivity puzzle’. This has been the experience of the UK in recent years. View comments Related Topics The alternative is to work smarter, not harder, and create more with the same amount of input. Top economists are trying to figure out what’s going on. That can happen when there are high firm survival rates, or in other words, so-called zombie firms that have survived due to the extraordinarily low interest rate environment.How best to boost investment will undoubtedly continue to generate much debate.After all, some economists argue that with such low borrowing costs - the UK can borrow for 30 years at just 2.5% - there should be scope to borrow and invest. In thought-provoking interviews, the UK’s most influential business leaders share their views on improving productivity. The large red dot shows the most recent data. The flipside of woeful productivity is that the UK has created a huge number of new jobs since the crisis - the “productivity puzzle” and the “jobs boom” are two sides of the same coin.
Among the many reasons suggested are low levels of investment, the impact of the financial crisis on bank’s willingness to lend to new businesses, higher numbers of people working beyond normal retirement age as a result of population and pensions changes, and firms’ ability to retain staff because of low pay growth. What matters is that it rebounds in the years to come. Including national insurance contributions, personal tax rates are too high pretty … The UK's productivity puzzle. But, as spare capacity disappears, this is unlikely to be why we still don't see a pick-up in productivity. Policy can affect the trade off, but there might not be any free wins that improve both sides of the equation. The Office for Budget Responsibility (OBR) is viewed by many as a serial offender. Reasons for this ‘productivity puzzle’ include – more flexible labour markets, stagnant real wages, lack of investment, increase in part-time/temporary work, and international trends in technological development. Importantly, wages are related to productivity. Other countries, especially in Europe, have also experienced unusually weak productivity growth during the recent period.Output of goods and services across the whole economy – usually measured by gross domestic product (GDP) - has resumed an upward trend after falling steeply during the economic downturn of 2008-2009. We use this information to make the website work as well as possible and improve our services.At its simplest, the UK economy, like any other, is a system which converts work into the output of goods and services.
1.