Fixing Britain's productivity problem is Hammond's only option

  • Low productivity is a crippling problem for the British economy. And it shows little sign of improvement: levels have been virtually flat since 2011. Hourly productivity is now 20% below its pre-crisis trend.
  • This week, the Office for Budget Responsibility is set to slash productivity forecasts. If there is no improvement to productivity levels, Philip Hammond is on course to breach his deficit targets.
  • In recent years, low productivity has been offset by growing employment. But unemployment is now so low that expanding the job market can deliver little extra growth.
  • Productivity is therefore the only game in town – and raising it is critical in both the short term and the long.
  • The Government cannot be blamed for poor productivity, which is largely caused by factors outside its control. But this week’s Budget represents a last chance to act before growth is squeezed.
  • A new report by Daniel Mahoney, Head of Economic Research at the Centre for Policy Studies, sets out a plan for how the Chancellor can boost productivity without large short-term fiscal costs.

Daniel Mahoney said: “Most of the productivity crisis is not the Government’s fault. But it is very much its problem. Years of success in bringing more people into the labour market have compensated for slack productivity – but now the only way that Britain can see sustained GDP growth is if we all work more productively. And there are many ways the Chancellor can do that without a splurge of irresponsible spending that would leave the public finances worse off.”


  • The Centre for Policy Studies was founded in 1974 by Margaret Thatcher and Keith Joseph, and develops and promotes policies to encourage enterprise and enable the institutions of a free society to flourish.
  • ‘The Great Productivity Squeeze’ is available to download from the CPS website.


Daniel Mahoney
Head of Economic Research, CPS
07790 316083
[email protected]

Emma Revell
Communications Officer, CPS
020 7222 4488
[email protected]

Date Added: Tuesday 21st November 2017