As we have said before, productivity isn’t everything, but in the long run it is almost everything…this was Nobel prize-winning economist, Paul Krugman’s statement that a country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker hour. As Martin Wolf points out in today’s FT, this is especially so in countries with relatively high levels of economic activity such as the UK.
Yet according to the Conference Board the UK’s productivity growth is expect to drop from a meagre 0.7% in 2015 to a negative -0.1% when figures are released for 2016.
Productivity growth is a longer term strategy requiring investment in both assets and people, but UK physical investment is very low and skills remain highly deficient. With a long term current account deficit, the UK spending large amounts more on importing goods and services than it exports, it’s not easy to see where the cash for investment comes without reducing consumption, not a pleasant thought in this era of Brexit austerity, as Wolf points out.
In a post truth world it will take a brave chancellor to speak this truth, even to those without power…