Education Information

Fixed Investment (% of GDP), 2000-2020

Source: World Bank and OECD

The second is Britain’s equally poor record on productivity. The most important 3 factor of production in any country is the labour force. Aggregate supply depends ultimately on how productive the labour force is, that is, on how efficiently and quickly workers produce the goods and services that we all need. If productivity grows slowly, or even stops growing altogether, aggregate supply will not be able to respond promptly to increases in demand. The country’s productive capacity will be in trouble. Britain has had an appalling record on productivity growth for a long time and especially during the last ten years, as can be seen in the following graph. Once again, the UK has performed worse than Germany and France, even though both of these countries also performed badly.

The two main measures of productivity are the Output per hour worked, to measure labour productivity 3 and the MultiFactor Productivity (MFP), which measures the changes in output unexplained by the changes in the labour and capital inputs (adjusted by quality proxies).

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