Why UK and old Europe have stagnation in productivity growth?
other
brexit
ukraine
Structural drag from an ageing workforce and thin R&D investment, compounded by Brexit’s hit to trade openness and the energy shock from the Ukraine war.
Stagnant productivity growth across the UK and Western Europe reflects both long-run and cyclical forces: a slowdown in the arrival of major new technologies, a workforce ageing out of easy retraining, and chronic underinvestment in R&D. On top of that sit two medium-term shocks — Brexit’s reduction of UK trade openness, and the Ukraine war’s disruption of German energy supply — which the piece identifies as the reason the UK’s productivity slump has been unusually severe, tied specifically to its reduced access to global value chains.
Originally published on Substack, August 29, 2023.