Productivity, trade openness and UK trade policy adventurism
brexit
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The UK’s productivity problem is really a competition problem — record markups and weak business dynamism, best addressed by a customs union with the EU.
The piece argues that the UK’s growth problem is best understood as a competitiveness crisis — high market power combined with low rates of firm entry that together choke off dynamism. ONS data shows markups at record levels (1.27 in 2022) and weak business churn, with what productivity growth there is concentrated among a small set of top-performing firms. The proposed fix is more trade openness: greater competition from abroad would compress prices and spur innovation, and of the available options a customs union with the EU is presented as the most realistic route to restoring market dynamism in the UK’s current protectionist drift.
Originally published on Substack, December 3, 2024.