United Kingdom: Selected Issues

IMF Staff Country Reports, July 25, 2025

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United Kingdom: Selected Issues

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Bibliographic details

• Published: July 25, 2025
• Series: IMF Staff Country Reports
• DOI: https://doi.org/10.5089/9798229018746.002

Summary findings

• Examines the evolution of labor productivity, defined as output per worker, in the United Kingdom over the past two decades.
• Identifies a significant widening of the productivity gap with the United States, particularly after the Global Financial Crisis (GFC).
• Highlights that the loss of pre-GFC growth engines, especially the leverage-driven boom in the financial sector, is a major factor in the divergence.
• Notes that outside the financial sector, UK publicly listed companies, particularly frontier firms, have also lagged behind their US counterparts due to a substantial decline in total factor productivity (TFP) growth post-GFC.
• Attributes the decline in TFP growth to reduced investment in intangible capital and lower R&D spending compared to the US.

Microeconomic drivers and evidence

• Uses sectoral and firm-level data to explore microeconomic drivers behind the UK–US productivity divergence.
• Financial sector: loss of pre-GFC leverage-driven growth materially reduced a prior engine of productivity growth.
• Non-financial publicly listed companies: frontier firms exhibit a notable post-GFC slowdown in TFP growth relative to US peers.
• Investment patterns: reduced investment in intangible capital and lower R&D spending are identified as proximate contributors to slower TFP growth.

Policy recommendations

• Recommends a two-pronged strategy to raise productivity growth:
  • Revitalize traditional growth engines, particularly in the financial and Information and Communication Technology sectors.
  • Foster a more supportive environment for business innovation by increasing access to scale-up finance and retaining high-skilled individuals.

Key themes and subjects

• Capital productivity
• Labor productivity
• Production
• Productivity
• Total factor productivity
• Emphasis on sectoral productivity patterns, frontier firms, intangible capital, R&D, and UK IP

United Kingdom: Selected Issues — IMF Staff Country Reports, July 25, 2025.

Content in this bundle

• Great Britain: Selected Issues; IMF Country Report No. 25/205; July 2025
  • Great Britain: Selected Issues; IMF Country Report No. 25/205; July 2025 (Markdown version)
  • Great Britain: Selected Issues; IMF Country Report No. 25/205; July 2025 (PDF)