Brexit will improve UK productivity???

31 May 2019 5:44 PM | John Heap (Administrator)

UK productivity has been bad for quite a long time and productivity growth is currently low. 


What impact will BREXIT (the departure of the UK from the European Union) have?


Well, we don't know all the implications but here is one scenario.


The UK is currently a high employment, low wage economy with lots of people working part-time.  This means that for some time it has often been easier for firms to expand production by hiring new staff than by investing in capital equipment.


When the free movement of labour from EU countries ends, there may, in certain industries, be a shortage of the right people with the right skills.  This will create problems .... but in the medium term, it will make capital investment seem more attractive and more financially viable. So, in the longer term, we may see a gradual move to a higher wage but more capital-intensive economy ...  with an associated productivity rise.


Its an ill wind ..... but remember, this is a rise in the recorded productivity figurer, not actual productivity.




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