Productivity Polarisation

The press has predictably focussed on the Brexit-related comments in the OECD’s recent Economic Survey: ‘The positive impact on growth [from reversing Brexit] would be significant’. The real story, however, is one of failing productivity, unevenly split across the UK: ‘Reviving labour productivity is the key to raising living standards’. The UK has the widest regional spread of labour productivity in the OECD. Recognising the economic differences between UK regions, OECD suggests that ‘sustaining high integration in global value chains would bolster goods-oriented regions’ whereas ‘services-oriented regions would benefit from services trade liberalisation and more integrated cities’. Positively, the report recognises significantly lower leverage ratios and external bank debt as dampening factors for future economic shocks. However, the report calls for a tax and spending review to identify ‘productivity enhancing fiscal initiatives’, and ‘to improve fairness in tax policy’.