{ "title": "Bridging the Gap: Understanding the UK-US Productivity Decoupling", "publication": "Selected Issues Papers, August 12, 2025", "sourceUrl": "https://www.imf.org/en/publications/selected-issues-papers/issues/2025/08/12/bridging-the-gap-understanding-the-uk-us-productivity-decoupling-569567", "canonical": "https://www.imf.org/en/publications/selected-issues-papers/issues/2025/08/12/bridging-the-gap-understanding-the-uk-us-productivity-decoupling-569567", "overlayPath": "/en/publications/selected-issues-papers/issues/2025/08/12/bridging-the-gap-understanding-the-uk-us-productivity-decoupling-569567/index.md", "summary": "The UK’s productivity gap with the US has widened over the past two decades, with productivity growth rates decoupling after the Global Financial Crisis (GFC).", "sections": [ { "heading": "Summary and central finding", "content": "- The UK’s productivity gap with the US has widened over the past two decades, with productivity growth rates decoupling after the Global Financial Crisis (GFC).\n- The paper uses sectoral and firm-level data to discuss different microeconomic drivers of the diverging trends.\n- While the loss of pre-GFC growth engines, in particular the leverage-driven boom in the financial sector, accounts for a large part of the productivity slowdown relative to the US, it is only part of the explanation." }, { "heading": "Microeconomic drivers and firm-level results", "content": "- Outside the financial sector, the UK’s publicly listed companies, especially frontier firms, have lagged behind the US due to a significant decline in post-GFC total factor productivity (TFP) growth.\n- This decline in TFP growth has resulted in widening efficiency gaps within firms.\n- The analysis discusses reduced investment in intangible capital following the GFC, along with lower R&D spending compared to the US, as possible contributors to subdued TFP growth among UK firms." }, { "heading": "Sectoral patterns and growth engines", "content": "- Key sectors identified for revitalization include the financial sector and the ICT sector.\n- The loss of the pre-GFC leverage-driven boom in finance is highlighted as a major contributor to the UK’s relative slowdown." }, { "heading": "Policy recommendations and strategy", "content": "- The paper suggests a two-pronged approach to revive productivity:\n 1) Building on the UK’s strengths and revitalizing traditional growth engines, especially the financial and ICT sectors; and\n 2) Fostering a more conducive environment to business innovation through greater access to scale-up finance and continued efforts to retain high skilled individuals.\n- Emphasis is placed on encouraging investment in intangible capital and raising R&D spending relative to the US to support TFP recovery." }, { "heading": "Subject classifications and keywords", "content": "- Subject: Capital productivity, Labor productivity, Production, Productivity, Total factor productivity\n- Keywords: Capital productivity, Europe, frontier firm, Global, Growth, I. productivity trend, Labor productivity, net Equity issuance, Productivity, productivity decile, sectoral productivity pattern, TFP growth Uk-US, Total factor productivity, UK's productivity gap, United Kingdom" }, { "heading": "Publication metadata and key numbers", "content": "- Pages: 28\n- Volume: 2025\n- DOI: https://doi.org/10.5089/9798229020985.018\n- Issue: 112\n- Series: Selected Issues Paper No. 2025/112\n- Stock No: SIPEA2025112\n- ISBN: 9798229020985\n- ISSN: 2958-7875\n- Author and date: Leonardo Indraccolo, August 12, 2025\n\nSource: Bridging the Gap: Understanding the UK-US Productivity Decoupling (Selected Issues Papers, 2025).\n\n---\n\n Content in this bundle\n\n- Sipea2025112\n - Sipea2025112 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Sipea2025112 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/selected-issues-papers/issues/2025/08/12/bridging-the-gap-understanding-the-uk-us-productivity-decoupling-569567" } ], "bullets": [ "[Markdown version](/en/publications/selected-issues-papers/issues/2025/08/12/bridging-the-gap-understanding-the-uk-us-productivity-decoupling-569567/index.md)", "[Structured JSON version](/en/publications/selected-issues-papers/issues/2025/08/12/bridging-the-gap-understanding-the-uk-us-productivity-decoupling-569567/index.json)", "[Bundle manifest](/en/publications/selected-issues-papers/issues/2025/08/12/bridging-the-gap-understanding-the-uk-us-productivity-decoupling-569567/bundle-manifest.json)", "Authors: Leonardo Indraccolo", "Published: August 12, 2025", "Series: Selected Issues Papers", "DOI: https://doi.org/10.5089/9798229020985.018", "The UK’s productivity gap with the US has widened over the past two decades, with productivity growth rates decoupling after the Global Financial Crisis (GFC).", "The paper uses sectoral and firm-level data to discuss different microeconomic drivers of the diverging trends.", "While the loss of pre-GFC growth engines, in particular the leverage-driven boom in the financial sector, accounts for a large part of the productivity slowdown relative to the US, it is only part of the explanation.", "Outside the financial sector, the UK’s publicly listed companies, especially frontier firms, have lagged behind the US due to a significant decline in post-GFC total factor productivity (TFP) growth.", "This decline in TFP growth has resulted in widening efficiency gaps within firms.", "The analysis discusses reduced investment in intangible capital following the GFC, along with lower R&D spending compared to the US, as possible contributors to subdued TFP growth among UK firms.", "Key sectors identified for revitalization include the financial sector and the ICT sector.", "The loss of the pre-GFC leverage-driven boom in finance is highlighted as a major contributor to the UK’s relative slowdown.", "The paper suggests a two-pronged approach to revive productivity:", "Emphasis is placed on encouraging investment in intangible capital and raising R&D spending relative to the US to support TFP recovery.", "Subject: Capital productivity, Labor productivity, Production, Productivity, Total factor productivity", "Keywords: Capital productivity, Europe, frontier firm, Global, Growth, I. productivity trend, Labor productivity, net Equity issuance, Productivity, productivity decile, sectoral productivity pattern, TFP growth Uk-US, Total factor productivity, UK's productivity gap, United Kingdom", "Pages: 28", "Volume: 2025", "DOI: https://doi.org/10.5089/9798229020985.018", "Issue: 112", "Series: Selected Issues Paper No. 2025/112", "Stock No: SIPEA2025112", "ISBN: 9798229020985", "ISSN: 2958-7875", "Author and date: Leonardo Indraccolo, August 12, 2025", "**Sipea2025112**" ], "related": [ { "title": "Sipea2025112", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025112.pdf", "summary": { "path": "/-/media/files/publications/selected-issues-papers/2025/english/sipea2025112.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/selected-issues-papers/2025/english/sipea2025112.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/publications/selected-issues-papers/issues/2025/08/12/bridging-the-gap-understanding-the-uk-us-productivity-decoupling-569567/index.md", "json": "/en/publications/selected-issues-papers/issues/2025/08/12/bridging-the-gap-understanding-the-uk-us-productivity-decoupling-569567/index.json", "bundleManifest": "/en/publications/selected-issues-papers/issues/2025/08/12/bridging-the-gap-understanding-the-uk-us-productivity-decoupling-569567/bundle-manifest.json" }, "generatedAtUtc": "2026-09-20T21:21:33.187Z" }