The UK has a productivity gap of between 23 and 32 per cent between it and the otherwise comparable economies of Germany, France, the Netherlands and Belgium. It also has a gap of 17 per cent between its current level of productivity and what it would have been if trends in the 25 years to 2007 had continued during and after the 2007–2008 financial crash.

This report presents new evidence on these two aspects of the UK’s 'productivity puzzle', providing a comprehensive review of previous analysis on the topic and systematically examining every factor that may have contributed towards this poor performance. It demonstrates that the productivity gap between the UK and other similar countries can be wholly attributed to relatively low productivity within sectors, rather than it being the result of an overall compositional bias in our economy towards low-productivity sectors. For example, manufacturing in the UK is 27 per cent less productive than in France, and 33 per cent less productive than in Germany, and a similar picture emerges in many other sectors.

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