Economic surveys and country surveillance

Economic survey of the United Kingdom 2007: Addressing the Productivity Gap

 

Contents | Executive summary | How to obtain this publication | Additional info

The following OECD assessment and recommendations summarise chapter 4 of the Economic survey of the United Kingdom published on 27 September 2007.

 

Contents                                                                                                                           

To boost productivity growth, better planning regulations, transport infrastructure and higher skill levels are needed

Productivity growth has remained strong in international comparison, but has slowed since the turn of the century. Investing in the human capital of the young is probably the most important lever to lift trend productivity growth, but there are also some other policy areas that can be improved:

Closing the productivity gap with the United States has stalled
Percentage gap in GDP per hour worked(1)


1. GDP in volume converted to US dollars using constant purchasing power parities.
Source: OECD (2007), Productivity database, March, www.oecd.org/statistics/productivity.

  • One priority should be to facilitate the entry of new businesses by reforming and simplifying planning regulations, especially in retail trade, as suggested by the Barker Review. Similarly, more land should be freed up for development by reconsidering the boundaries of the “green belts” in fast-growing areas. Ways to improve incentives for land development should also be considered.
  • Good transport links are important for the efficient movement of goods and to support labour market efficiency and flexibility. After many years of under-investment in transport infrastructure, transport investment has picked up in recent years but still looks insufficient to meet the targets outlined in the government’s Ten Year Plan for Transport. Looking ahead, ongoing investment will be required and more efforts should be made to ensure that infrastructure investment does not fall short of that envisaged in the Ten Year Plan. Spending should be targeted on key strategic growth areas, as recommended by the Eddington Review, and the government should continue to examine options for addressing road congestion and environment impacts, including the introduction of a nationwide road congestion pricing system.
  • A key policy to boost innovation performance has been the introduction of research and development (R&D) tax credits, although it is uncertain whether these represent a cost-effective use of tax-payer funds.
  • More broadly, innovation and productivity can be supported by raising the general skill level of the workforce. Workforce skill levels do not compare well with those of the best performing countries. The UK government has plans to address this including through publicly-funded adult training that focuses on the most disadvantaged groups, which currently receive little training. Greater private investment in training is needed as well, in order to raise skills at all levels. In terms of evaluating progress, the government should focus more on international measures of adult cognitive skills as well as on measuring the outcomes from domestic qualifications in terms of employment and pay progression.

 

Transport infrastructure spending remains low by international standards
Road and rail investment in per cent of GDP


1. No data is available for railways for Ireland from 2002 and there are no railways in Iceland.
2. To 2004 instead of 2005 for Austria, Italy and the United Kingdom.
Source: European

 

How to obtain this publication                                                                                      

The Policy Brief (pdf format) can be downloaded in English. It contains the OECD assessment and recommendations.The complete edition of the Economic survey of the United Kingdom 2007 is available from:

Additional information                                                                                                  

 

For further information please contact the UK Desk at the OECD Economics Department at eco.survey@oecd.org.  The OECD Secretariat's report was prepared by Anne-Marie Brook, Åsa Johansson, Petar Vujanovic and Marte Sollie under the supervision of Peter Hoeller.

 

 

 

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