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Addressing the UK’s productivity gap: the ‘Cinderella issue’ of the 2015 General Election?

In the Budget announcement today, the Chancellor is very likely to highlight the economic importance of addressing low productivity in the UK – which, despite the economic recovery, has remained below 2008 levels.

But do UK politicians really think that the productivity gap is our biggest economic challenge? Nesta worked with ComRes to ask current and prospective MPs what they thought were the key economic issues facing the UK.

The results told us that although low productivity is widely thought to be a big issue, it lags behind other flagship priorities for the UK’s two biggest political parties. There is also very little agreement about the main cause of the productivity gap, potentially hindering attempts to fix it.

Nesta’s research shows that failure to address the ‘productivity puzzle’ could be costing Britain at least £96 billion a year, corresponding to 5% of the UK’s GDP. To fix it, we’d like to see the next Government putting more investment into innovation, helping to create a skilled workforce, and creating the right conditions for finance and investment.

The survey results

ComRes asked 150 MPs about their views on the importance of addressing economic issues currently facing the UK. Across all MPs the government deficit and low productivity are the two top issues, ranking at broadly the same level of importance.  Low pay is seen as the third most important economic issue, followed by inequality and then inflation.

PERCEIVED IMPORTANCE OF ECONOMIC ISSUES (MPs)

Base: MPs n = 150. Q: How important, if at all, is it to address each of the following issues facing the UK economy?

Yet for each the two largest political parties, low productivity is eclipsed by other economic priorities. While 68% of Conservative MPs see it as an important issue, it lags far behind their biggest concern, the deficit (87%). Among Labour MPs, low productivity (70%), lags far behind low pay (92%) and inequality (80%).

PERCEIVED IMPORTANCE OF ECONOMIC ISSUES (MPs by party)

Base: All MPs n = 150, Conservative MPs n = 49, Labour MPs n=84. Q: How important, if at all, is it to address each of the following issues facing the UK economy?

There is also little consensus on the causes of the productivity gap, with MPs from all parties equally rating a lack of access to finance for businesses (24%), poor workforce skills (22%) and low business investment (21%).

PERCEIVED CAUSES OF PRODUCTIVITY GAP (MPs by party)

Base: All MPs n = 150, Conservative MPs n = 49, Labour MPs n=84. Q: Output per worker (productivity) in the UK economy remains below 2008 levels. The following is a list of suggested causes of the decline in UK productivity since 2008. Please indicate whether you think it is the main cause(s), a contributing factor or not a factor.

Author

Jen Rae

Jen Rae

Jen Rae

Head of UK Innovation Policy

Jen Rae is a policy advisor on innovation and economic growth for Nesta’s Policy and Research team.

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Stian Westlake

Stian Westlake

Stian Westlake

Executive Director of Policy and Research

Stian led Nesta's Policy and Research team. His research interests included the measurement of innovation and its effects on productivity, the role of high-growth businesses in the e...

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