Simon Pittaway
@simonpittaway.bsky.social
Working on macro, wealth and household balance sheets at the Resolution Foundation.
Very kind, thank you!
April 8, 2025 at 11:20 AM
Very kind, thank you!
And you can also tune in to hear me discuss this work (and much more I'm sure) with @jasonfurman.bsky.social
and the Bank of England's Clare Lombardelli at our event this afternoon.
www.resolutionfoundation.org/events/a-lea...
and the Bank of England's Clare Lombardelli at our event this afternoon.
www.resolutionfoundation.org/events/a-lea...
A league of their own • Resolution Foundation
What is driving the US’ impressive productivity outperformance? How does it differ from the UK, and what lessons can be drawn? And what can firms and policy makers do to reverse the UK’s productivity ...
www.resolutionfoundation.org
April 8, 2025 at 9:49 AM
And you can also tune in to hear me discuss this work (and much more I'm sure) with @jasonfurman.bsky.social
and the Bank of England's Clare Lombardelli at our event this afternoon.
www.resolutionfoundation.org/events/a-lea...
and the Bank of England's Clare Lombardelli at our event this afternoon.
www.resolutionfoundation.org/events/a-lea...
For much more on all of this see the report published this morning.
www.resolutionfoundation.org/publications...
www.resolutionfoundation.org/publications...
Yanked away • Resolution Foundation
Britain’s record of productivity growth in the 2010s was dismal. But halfway through the 2020s things appear to have got worse not better, with official data likely understating the scale of Britain’s...
www.resolutionfoundation.org
April 8, 2025 at 9:49 AM
For much more on all of this see the report published this morning.
www.resolutionfoundation.org/publications...
www.resolutionfoundation.org/publications...
🏢 Dynamism: non-residential Stamp Duty is a tax on business reallocation and badly needs reforming. Reforms could be funded by cutting the VAT registration threshold to £30k, which would raise £1.5bn+ and remove a disincentive for small firms to grow.
April 8, 2025 at 9:49 AM
🏢 Dynamism: non-residential Stamp Duty is a tax on business reallocation and badly needs reforming. Reforms could be funded by cutting the VAT registration threshold to £30k, which would raise £1.5bn+ and remove a disincentive for small firms to grow.
🌐 Innovation: free trade boosts innovation by exposing domestic businesses to ideas from aboard and increasing the potential rewards from innovating. The imposition of tariffs by the US underscore the need to pursue trade agreements elsewhere.
April 8, 2025 at 9:49 AM
🌐 Innovation: free trade boosts innovation by exposing domestic businesses to ideas from aboard and increasing the potential rewards from innovating. The imposition of tariffs by the US underscore the need to pursue trade agreements elsewhere.
💷 Investment: the government should bring software in scope of full expensing - allowing businesses to offset their investment against their tax bills, as they already can with lots of physical investment.
April 8, 2025 at 9:49 AM
💷 Investment: the government should bring software in scope of full expensing - allowing businesses to offset their investment against their tax bills, as they already can with lots of physical investment.
The lessons for policy are clear: we need to raise business investment, boost innovation and reverse the long-run decline in business dynamism. Of course, none of these are directly under policy makers’ control, but there are things we can do to shift the odds in our favour.
April 8, 2025 at 9:49 AM
The lessons for policy are clear: we need to raise business investment, boost innovation and reverse the long-run decline in business dynamism. Of course, none of these are directly under policy makers’ control, but there are things we can do to shift the odds in our favour.
Finally, another potential explanation for the strength of US services is an uptick in business dynamism. Covid shook up the US economy in a big way, and there has been a long-lived uptick in labour reallocation and business formation – which hasn’t been matched in Britain.
April 8, 2025 at 9:49 AM
Finally, another potential explanation for the strength of US services is an uptick in business dynamism. Covid shook up the US economy in a big way, and there has been a long-lived uptick in labour reallocation and business formation – which hasn’t been matched in Britain.
Look at the type of investment, tech adoption seems to play a major role. Either side of the pandemic, American businesses increased spending on software twice as quickly as their British counterparts. We see a similar pattern in related investments like ICT and R&D.
April 8, 2025 at 9:49 AM
Look at the type of investment, tech adoption seems to play a major role. Either side of the pandemic, American businesses increased spending on software twice as quickly as their British counterparts. We see a similar pattern in related investments like ICT and R&D.
This pattern of outperformance is consistent with a concentrated investment slowdown since the Brexit referendum. In key service sectors, investment has now fallen so low that it only just offsets deprecation – i.e. these sectors' capital stock in didn’t grow in 2023.
April 8, 2025 at 9:49 AM
This pattern of outperformance is consistent with a concentrated investment slowdown since the Brexit referendum. In key service sectors, investment has now fallen so low that it only just offsets deprecation – i.e. these sectors' capital stock in didn’t grow in 2023.
3️⃣ Tech-using sectors are key
America’s growing advantage in services isn’t confined to the tech (ICT) sector. Professional services account for 2x as much of the recent productivity divergence. In reality, the US has outperformed the UK in a range of key service sectors.
America’s growing advantage in services isn’t confined to the tech (ICT) sector. Professional services account for 2x as much of the recent productivity divergence. In reality, the US has outperformed the UK in a range of key service sectors.
April 8, 2025 at 9:49 AM
3️⃣ Tech-using sectors are key
America’s growing advantage in services isn’t confined to the tech (ICT) sector. Professional services account for 2x as much of the recent productivity divergence. In reality, the US has outperformed the UK in a range of key service sectors.
America’s growing advantage in services isn’t confined to the tech (ICT) sector. Professional services account for 2x as much of the recent productivity divergence. In reality, the US has outperformed the UK in a range of key service sectors.
But, surprisingly, the US’s growing productivity advantage has been concentrated in less energy-intensive service sectors.
This isn’t to say energy prices don’t matter, but other factors have been more important in explaining sectoral productivity growth in recent years.
This isn’t to say energy prices don’t matter, but other factors have been more important in explaining sectoral productivity growth in recent years.
April 8, 2025 at 9:49 AM
But, surprisingly, the US’s growing productivity advantage has been concentrated in less energy-intensive service sectors.
This isn’t to say energy prices don’t matter, but other factors have been more important in explaining sectoral productivity growth in recent years.
This isn’t to say energy prices don’t matter, but other factors have been more important in explaining sectoral productivity growth in recent years.
2️⃣ Energy prices??
The UK has seen a massive spike in energy prices since 2019. Industrial gas prices rose by 158% between 2019 and 2023, compared to a 21% rise in the US. And because we’re so gas-dependent for electricity generation, electricity prices rose sharply too.
The UK has seen a massive spike in energy prices since 2019. Industrial gas prices rose by 158% between 2019 and 2023, compared to a 21% rise in the US. And because we’re so gas-dependent for electricity generation, electricity prices rose sharply too.
April 8, 2025 at 9:49 AM
2️⃣ Energy prices??
The UK has seen a massive spike in energy prices since 2019. Industrial gas prices rose by 158% between 2019 and 2023, compared to a 21% rise in the US. And because we’re so gas-dependent for electricity generation, electricity prices rose sharply too.
The UK has seen a massive spike in energy prices since 2019. Industrial gas prices rose by 158% between 2019 and 2023, compared to a 21% rise in the US. And because we’re so gas-dependent for electricity generation, electricity prices rose sharply too.
The mining and quarrying sector (of which oil and gas is the main part) accounts for 1/6th of the post-pandemic productivity divergence between Britain and America, despite being less than 2% of GDP in both countries.
April 8, 2025 at 9:49 AM
The mining and quarrying sector (of which oil and gas is the main part) accounts for 1/6th of the post-pandemic productivity divergence between Britain and America, despite being less than 2% of GDP in both countries.
1️⃣ Oil and gas
Production keeps booming in America while dwindling in Britain. Hours are sticky though: workers in UK mining and sector clocked the same number of hours in 2019 as they did in 2005, despite extraction falling ~50%. Less output + same hours = falling productivity.
Production keeps booming in America while dwindling in Britain. Hours are sticky though: workers in UK mining and sector clocked the same number of hours in 2019 as they did in 2005, despite extraction falling ~50%. Less output + same hours = falling productivity.
April 8, 2025 at 9:49 AM
1️⃣ Oil and gas
Production keeps booming in America while dwindling in Britain. Hours are sticky though: workers in UK mining and sector clocked the same number of hours in 2019 as they did in 2005, despite extraction falling ~50%. Less output + same hours = falling productivity.
Production keeps booming in America while dwindling in Britain. Hours are sticky though: workers in UK mining and sector clocked the same number of hours in 2019 as they did in 2005, despite extraction falling ~50%. Less output + same hours = falling productivity.
Britain isn’t alone in its recent struggles. In the G7, Canada, France and Italy have all seen productivity fall since Q4 2019. But (up until now at least) America has been in a league of its own.
In the paper, I set out three things to know about the recent US-UK divergence in productivity.
In the paper, I set out three things to know about the recent US-UK divergence in productivity.
April 8, 2025 at 9:49 AM
Britain isn’t alone in its recent struggles. In the G7, Canada, France and Italy have all seen productivity fall since Q4 2019. But (up until now at least) America has been in a league of its own.
In the paper, I set out three things to know about the recent US-UK divergence in productivity.
In the paper, I set out three things to know about the recent US-UK divergence in productivity.
What we've seen is growth slowing across most of the UK economy. A notable slowdown has been in Info & comms, the main source of productivity growth in the 2010s. It’s still contributing more than any other sector to aggregate productivity growth, but only half as much as before.
April 8, 2025 at 9:49 AM
What we've seen is growth slowing across most of the UK economy. A notable slowdown has been in Info & comms, the main source of productivity growth in the 2010s. It’s still contributing more than any other sector to aggregate productivity growth, but only half as much as before.
This partly reflects measurement difficulties, as labour productivity in healthcare doesn’t capture quality improvements. But even if we used NHS England’s quality-adjusted measure of acute care productivity, overall UK productivity would have grown just 0.3% from 2019 to 2024.
April 8, 2025 at 9:49 AM
This partly reflects measurement difficulties, as labour productivity in healthcare doesn’t capture quality improvements. But even if we used NHS England’s quality-adjusted measure of acute care productivity, overall UK productivity would have grown just 0.3% from 2019 to 2024.
What’s behind this? I find that the health sector has been the biggest drag on aggregate productivity since 2019. It’s our third biggest sector by gross-value added, and only the tiny sectors of mining and utilities have seen bigger sectoral productivity hits.
April 8, 2025 at 9:49 AM
What’s behind this? I find that the health sector has been the biggest drag on aggregate productivity since 2019. It’s our third biggest sector by gross-value added, and only the tiny sectors of mining and utilities have seen bigger sectoral productivity hits.
More reliable data sources point to a stronger post-pandemic recovery in employment than the LFS, and a lower level of productivity as a result. Our preferred estimate – based on HMRC’s payroll and tax data – suggests productivity fell by a cumulative 0.5% between 2019 and 2023.
April 8, 2025 at 9:49 AM
More reliable data sources point to a stronger post-pandemic recovery in employment than the LFS, and a lower level of productivity as a result. Our preferred estimate – based on HMRC’s payroll and tax data – suggests productivity fell by a cumulative 0.5% between 2019 and 2023.
Worryingly, things have got worse in the 2020s. Headline data says productivity grew by 1.8% in total between 2019 and 2024, about two-thirds of the UK’s already meagre 2010s growth rate.
But this is based on unreliable LFS data and probably *understates* the scale of the problem.
But this is based on unreliable LFS data and probably *understates* the scale of the problem.
April 8, 2025 at 9:49 AM
Worryingly, things have got worse in the 2020s. Headline data says productivity grew by 1.8% in total between 2019 and 2024, about two-thirds of the UK’s already meagre 2010s growth rate.
But this is based on unreliable LFS data and probably *understates* the scale of the problem.
But this is based on unreliable LFS data and probably *understates* the scale of the problem.
Productivity growth matters a lot. It is the main driver of higher wages across countries or over time. But in 2010s Britain, productivity (measured as GDP per hour) grew by just 0.6% per year - the lowest in the G7 bar Italy.
April 8, 2025 at 9:49 AM
Productivity growth matters a lot. It is the main driver of higher wages across countries or over time. But in 2010s Britain, productivity (measured as GDP per hour) grew by just 0.6% per year - the lowest in the G7 bar Italy.
Thoroughly enjoyed this.
One q I had: if the long end is currently the most illiquid part of the curve, is there a risk that reducing long-dated issuance just makes that worse?
One q I had: if the long end is currently the most illiquid part of the curve, is there a risk that reducing long-dated issuance just makes that worse?
March 21, 2025 at 10:00 AM
Thoroughly enjoyed this.
One q I had: if the long end is currently the most illiquid part of the curve, is there a risk that reducing long-dated issuance just makes that worse?
One q I had: if the long end is currently the most illiquid part of the curve, is there a risk that reducing long-dated issuance just makes that worse?
The key question is, with the Government seemingly constrained by its fiscal rules, will the Bank of England ride to the rescue with faster interest rate cuts?
February 13, 2025 at 9:58 AM
The key question is, with the Government seemingly constrained by its fiscal rules, will the Bank of England ride to the rescue with faster interest rate cuts?