Government invests £37 million to address the UK’s productivity puzzle

Government today announced an investment of £37 million to address the UK’s ongoing productivity puzzle, in the hopes of boosting wage growth and living standards.

£32 million will go to create a new UK Productivity Institute in Manchester, which will perform ground-breaking research and explore innovative ways to increase productivity, boost wages, and support the economic recovery efforts across the UK by identifying the key barriers that need to be broken down.

A further £5 million will fund a new research programme at the London School of Economics (LSE) to work alongside the new Institute, to identify the ways that the UK’s innovative products and services can be better distributed across the economy’s sectors to drive productivity growth.

techUK welcomes the new funding package, the largest economic and social research investment ever in the UK. The puzzle of the UK’s low productivity growth has hampered economic growth since the Great Recession of 2007-2009. It is evident that the adoption of digital technologies can drive productivity growth and economic development, explaining why the tech sector has been a bright spot, growing around six times faster than the economy as a whole.

The new research efforts should examine how digital technologies can be best applied to drive productivity growth across the UK, furthering both the Government’s “Levelling Up” agenda and the COVID-19 economic recovery efforts, as well as the barriers holding back firms of all sizes, but especially small and medium-sized enterprises (SMEs) from adopting digital technology.

The COVID-19 pandemic has demonstrated clearly the advantages of digital software and platforms, and the UK should double down on its efforts to help SMEs adopt tech solutions. Government recently took a good first step in this direction, making grant funding available to SMEs to undergo digital transformation. The new research on productivity should examine the effects of expanding those grants into a full-fledged Digital Adoption Fund, as well as the creation of a “Chief Technology Officer as a Service” programme, similar to the Digital Business Link programme techUK proposed alongside the Digital Adoption Fund in our 2020 Spring Budget submission. 

The Government’s original press release can be read in full here.