Drivers of productivity across the UK

This research was undertaken by researchers at the Confederation of British Industry using administrative data made available via the Office for National Statistics (ONS) Secure Research Service (SRS), which is being expanded and improved with ADR UK funding.

 

This project examines why variations in productivity and growth exist across the regions and nations of the UK, and investigates what business and government can do to tackle them. This project was led by Anna Leach, Mia Anderson, George Brown, and Patrick Day of the Confederation of British Industry. 

The research process involved analysing aggregate firm characteristics to understand their dispersion across the UK, which were followed by the specification and testing of several regression analyses. From this, a summary of performance was produced to understand whether an area is performing as predicted. Analysis on any deviation from the predicted value was concluded to understand the possible causes. 

To fulfil the aim of this project, the research team analysed seven datasets: Annual Respondents Database X (ARDX), Business Structure Database (BSD), Annual Survey of Hours and Earnings (ASHE), Business Enterprise Research and Development (BERD), Business Register and Employment Survey (BRES), E-Commerce Survey, National Employer Skills Survey (NESS), and Community Innovation Survey (CIS). 

Four main drivers of regional productivity differences were found: 

• transport links that widen access to labour; 

• better management practices; 

• a higher proportion of firms who export and innovate; 

• and educational attainment of skills of young people at 16. 

The most productive areas of the UK were three times more productive than the least. The findings predict that an economy could be £208 billion larger if each local area could improve at the same rate as the top performer in their respective region or nation. 

This research has had interest from central government, the Bank of England, and cross-party back bench MPs. The findings provide an evidence base to inform local city deals, local leaders to test and shape their priorities and spending decisions, and inform policy and service planning decisions.