16 JULY 2026
One of the clearest drivers of the UK’s economic stagnation has been weak productivity growth, particularly relative to other major economies such as the US.
The chart highlights a stark divergence since the 2008 financial crisis with US output per worker hour rising steadily, whilst the UK equivalent has largely flatlined.
This gap reflects a combination of weak business investment, persistent skills shortages, and regulatory and planning constraints that have weighed on economic activity.
Reversing this trend is central to any credible UK economic strategy as even modest improvements in productivity growth would have powerful cumulative effects on GDP, tax revenues and debt sustainability.
There is no shortage of policy options, but the most compelling revolve around a sustained upturn in public and private investment in infrastructure, digitalisation and AI adoption.
At the same time, a renewed focus on skills, vocational training and labour market participation would help address structural bottlenecks.
Taken together, these measures offer the new Prime Minister a viable path to closing the productivity gap and, over time, easing the UK’s substantial fiscal constraints.
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