The UK's productivity pain

Britain, like other economies, is facing low productivity growth, writes Richard Jeffrey


Richard Jeffrey

Richard Jeffrey

Chief Economist

In 2017’s Autumn Budget, Chancellor Philip Hammond slashed the UK’s productivity growth forecast, as earlier optimistic predictions proved unfounded. There is now concern that far from being a recovery phase following the financial crisis, we may be in a period of permanently low productivity growth.

In his Budget speech the Chancellor said: “Regrettably our productivity performance continues to disappoint. The Office for Budget Responsibility (OBR) has assumed at each of the last 16 fiscal events that productivity growth would return to its pre-crisis trend of about 2% a year, but it has remained stubbornly flat.”

In light of this disappointing performance, the OBR revised down its forecast for GDP growth, which it believes will reach 1.5% in 2017, 1.4% in 2018, and 1.3% in 2019 and 2020, before picking back up to 1.5% and finally 1.6% in 2022.

In an earlier report published before the Budget, the OBR had said: “It is notable that the ‘productivity puzzle’ is not just a UK phenomenon. For instance, the US Congressional Budget Office has made similar downward revisions to its productivity forecasts, as have the IMF and the OECD in their forecasts for many advanced economies. And weak investment and the impact of very low interest rates are plausible explanations for many countries.

“But it is also worth noting that some commentators have argued that the advanced economies have entered an era of permanently subdued productivity growth for structural reasons.”

Suffering from low productivity is not a unique phenomenon to the UK. Weak investment and low interest rates in economies across the world mean that productivity is a puzzle that needs global attention.


Richard Jeffrey

Richard Jeffrey

Chief Economist

Richard Jeffrey was Chief Economist at Cazenove Capital until he retired in January 2018. 

Issued in the Channel Islands by Cazenove Capital which is part of the Schroders Group and is a trading name of Schroders (C.I.) Limited, licensed and regulated by the Guernsey Financial Services Commission for banking and investment business; and regulated by the Jersey Financial Services Commission. Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested. This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements. All data contained within this document is sourced from Cazenove Capital unless otherwise stated.

Contact Cazenove Capital

To discuss your wealth management requirements, or to find out more about Cazenove Capital and our services, please contact: