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Economic growth and productivity: the fundamentals

Economic activity and the productivity that underlies it has a major impact on our ability to provide things that people value – from homes to hospitals to holidays. If we are to achieve continued improvement in the standard of living for UK citizens by 2040, growth will be key.

Where is the UK economy now, and where is it heading? There is no shortage of commentary, data and debate. These fundamental facts aim to distil the wealth of information into the core, foundational evidence and trends that policymakers should have front of mind as they consider the options, providing clear signals amongst the noise. Unsurprisingly, they illustrate that the UK economy is having significant difficulties at the moment with GDP per capita, real wages and productivity performing poorly both absolutely and comparatively. There is also some indication of the proximate causes of this: regional imbalances and low investment both now and historically appear as prime culprits. Whilst employment looks healthier there are warning signs there too, from growing long-term sickness to the impact of demographic changes by 2040.

Of course in considering these foundational facts it is worth bearing in mind that economic outcomes are just one way of measuring social progress. Whilst overall GDP growth, rising productivity and real wages tend to be associated with higher living standards, economic measures don’t give us the whole picture. Not least, aggregate economic growth can mask inequality in varying forms. Across the UK 2040 Options project, we will be considering a wide set of outcomes from health to education and wealth inequality.

Read the ten things we think people working in economic growth and productivity should know, by downloading our fundamentals document.