How can we work together to solve the productivity puzzle?

My background as an applied economist leaves me under no illusion as to how complex this issue is. Not least because – for some – the quest for productivity has become dangerously synonymous with the search for efficiency. As a result, previous productivity drives have often felt like top-down impositions, rather than missions that the entire nation is invested in.

Yet, there’s little doubt that productivity remains vital to strive for. Increased productivity will provide the long-term, sustainable growth that this government has placed its bets on. It has the potential to improve living standards while also funding vital goals like tackling climate change, improving social justice, and providing better health outcomes.

It is the government’s hope that its commitment to a new industrial strategy with a ten-year plan for growth will help to drive progress. By working with businesses, they plan to inspire confidence through certainty, bringing much needed investment to the UK.

As this commitment takes shape, productivity will need to be recast and placed at the centre of decision-making. It’s this approach to productivity, powered by innovation, that can create a more prosperous, safer, healthier, more equitable, and sustainable future.

Productivity as a shared goal – powered by innovation

The key is to get beyond the academic literature that focuses on macro causes and look for practical, pragmatic ways to reposition productivity, powered by innovation, as a shared goal. To succeed, this goal will need to be embedded across all actors – government, industry, financial investors, regulators, academia, and the third sector, all the way through to skills providers, healthcare, and the communities we all serve.

It’s a privilege to lead a company that has 80 years of experience working at the forefront of public and private sector innovation. Combined with my own experience of working for more than a decade at the intersection between public health and life science organisations, I’m convinced we have the realistic examples and practices that, if brought together in the right ways, can be at the heart of a successful industrial strategy. There are three key areas to consider now:

• Codify and embed productivity in every dialogue
• Focus the ecosystem on high-impact areas
• Harness AI and disruptive tech within the public sector.

Codify and embed productivity in every dialogue

From central government down, productivity should be a critical element of every mission that guides the operation of the state, and beyond. While this is a significant cultural shift, successful execution would ensure that – in a million tiny innovative actions and decisions taken every day – all stakeholders consider, account for, and work towards previously hidden productivity-boosting opportunities. This will be the key to unlocking the growth the UK needs.

Making Britain a clean energy superpower, for instance, is an incredibly complex problem, requiring multiple actors, deep collaboration, and a complicated web of trade-offs. Just look at sustainable aviation fuels (SAF) and the different policy levers, conflicting objectives, regional impacts, huge infrastructure questions, opportunity costs, and so on. Get it right, and the UK SAF industry could, by 2030, be worth £1.8 billion to the UK economy, and create more than 10,000 jobs. That’s why government departments need to routinely surface the productivity challenge: consistently making it an explicit objective, a question that must be asked.

This can include industrial aims like spurring new research and development, and investment, through to getting people back into the workforce. Based on our work in this area we find that the right health innovations can return £5 for every £1 invested.

Yet often, I see a lack of maturity in how data is used to guide insightful productivity dialogues. I see this in the Treasury, with local authorities, and in the third sector – across strategies, business cases for change, benefit calculations, investment prioritisation, and progress reporting.

There’s an opportunity to learn from sectors such as transport, where investment in rail infrastructure often acts as a catalyst for regional economic development. For example, the premise of the original Northern Powerhouse Rail scheme was to reduce journey times and increase capacity between major cities across the north of England, offering businesses greater access to suitably skilled employees, as well as increasing individuals’ job opportunities. This approach would be particularly useful in areas which are critical for growth but struggle to articulate outcomes; such as agriculture, or smaller local authorities where we constantly see valuable investments unutilised as resource isn’t available for application processes.

Getting this dialogue right is important everywhere, but there are two areas with significant potential gains:

Cross-departmental programmes

Some high-impact pro-productivity policy goals are very hard to achieve within one department’s remit. For example, the NHS has a strong business case to pivot to preventative healthcare, which is exponentially more beneficial for the economy. Over the years, we’ve seen progress and support from other departments such as education (where children learn about healthy lifestyles and are provided with nutritional school meals), business regulation (which has implemented better health and safety and advertising standards), and transport (with the implementation of school streets). Getting this right in healthcare would provide a blueprint for similar preventative investments – such as in justice and welfare – that can drive radical transformation.

Regional initiatives

Some of the most powerful pro-productivity measures are only visible or deliverable at a local or regional level. These can bring major social benefits too, as the barriers to productivity are often also barriers to social justice, equality, and access to public services. For this reason, it was encouraging to see all upper tier authorities invited to submit their local growth plans by the end of September.

Whether the ideas emerge bottom up or top down, a productivity-focused government needs to select and sponsor the most promising innovations: by providing secure funding, empowering decision-making, setting accountability, and convening central, regional, and local public servants. Innovate UK, along with the Biotechnology and Biological Sciences Research Council, recently announced investments to enhance the nutritional quality of food and beverage products consumed by the UK population, ultimately supporting health and wellbeing in advance of medical interventions.

Focus the ecosystem on high-impact areas

The government’s mission-driven approach to delivery provides the direction for growth – but it is equally important that the wider UK ecosystem be orientated towards the productivity and innovation agenda. It sounds simple, but the complex web of commercial and individual interests can be hard to mobilise. It’s much more nuanced than the state working with the private sector, and deeper than talk of partnerships.

It can have a profound effect when a globally competitive, high-growth ecosystem really works. The nine countries of Central and Eastern Europe (CEE) have worked together to create science, innovation, and technology partnerships, and the region has increased its enterprise value since 2017 by 7.6 times.

Closer to home, startups and scale-ups attract investment, create well-paid jobs, and diffuse innovations, not only in their own organisations but also in their supply chain. These high-growth ecosystems can further other policy objectives, such as creating well-paid jobs, drawing investment into left-behind areas of the country, advancing decarbonisation, or improving health outcomes.

It brings together world-leading knowledge, talent, and facilities in one place and has emerged as an innovative life sciences supercluster. Come 2027, and it will be home to the largest life sciences development in Europe – an 823,000 square-foot vertical campus. This microcosm is able to advance new technologies and feed into the wider healthcare ecosystem.

The state has an essential but understated role in cultivating these ecosystems, through its procurement budget, R&D spending, and targeted interventions into things like regulation and inward investment. There are many promising areas for high-growth sectors here, but the UK currently lacks the scale to realistically compete for world-leading status across the board.

A strong and intentional play across the intersect of healthcare, social care, and life sciences, with the goal of making patients healthier in the communities in which they live – anticipating and reducing the burden on the NHS – is an example of how a strong sector plan could create a positive halo effect across the economy.

Compared to other countries, the UK still has a huge strategic advantage in the ability of the NHS to act as sole or majority ‘customer’, with vast spending power, talented staff, and access to data.

And 65 percent of healthcare leaders cite medtech and pharma’s lack of understanding of complex and different healthcare systems and pathways as a key barrier to hospital at home adoption. This is a race that our NHS-powered system in the UK can win.

And bringing the right players together is possible. Consider the complexity of the system required when the need arose to build 30,000 life-saving ventilators in just eight weeks during the COVID-19 pandemic – one of the largest mobilisations of innovation, science, and engineering since the Second World War.

The government’s plan to prioritise sectors requires intentionality about who to back and how; bringing together all of the players, and concentrating support where success is most likely and where impact will be most felt.

Harness AI and disruptive tech within the public sector

It’s clear that the practical, realistic implementation of AI and other technologies can fire innovation, drive productivity, and increase growth. AI has the potential to supercharge both the civil service and government departments, as well as accelerating adoption and diffusion of disruptive new technologies through the public sector and beyond. The good news is that, in the UK, there are twice the number of AI-based companies than any European nation today.

AI offers the government a route to overcome legacies of under-investment and leapfrog to a leader position of technology adoption. Just as many telecoms late adopter countries went from low uptake of landlines to becoming the global epicentre of smartphone usage, so too can the UK use AI to leapfrog ahead.

As with any other form of automation, AI can cut costs, but the smarter play is to focus on effectiveness, not efficiency. By showing that AI is there to accelerate, not replace, and that in doing so it can power innovation and enhance productivity, the government has an opportunity to showcase best practice and generate momentum across the broader economy. We’ve seen one UK government body successfully use AI to reduce certain basic administrative tasks by 90 percent.

Lastly, there’s a talent opportunity. The UK needs a public sector with the talent to keep the momentum up. And the brightest of the next generation of talent want to work with innovative technology, to be part of the AI revolution, and to have the tools and skills for the future. We need to prove to them that for exciting careers – with purpose – they should head to the public sector. It’s also a risk: our own snap poll shows that three quarters of leaders believe the talent shortage in AI makes it difficult to invest.

AI is all about new possibilities, so it’s worth thinking about what these could be for those working in the public sector.

And, in the longer-term, could government departments or networks use large language models (LLMs) to communicate directly with LLMs from private sector enterprises or networks? The opportunity: an AI-connected intelligence network, leveraged by experts and freeing them from the mundane to focus instead on application of those skills to add value.

Cautious optimism

None of this will be easy but it can be done. Crucially, these steps are designed to move productivity from an abstract goal to one where all of us think of productivity – powered by innovation – as a shared goal. This means government, industry, financial investors, regulators, and the third sector, all the way through to educators, healthcare, and the communities we all serve.

With this shared goal in mind, we can take advantage of disruptive change, innovative thinking, and breakthrough technologies across the board. Let’s fix the productivity puzzle to unlock growth across our nations and regions.