The Organisation for Economic Co-operation and Development (OECD) has warned that the UK must address its failure to raise its output per worker since the start of the downturn. The OECD believes that this has led to wages being held back.
Future economic growth and improved living standards all depend on an increase in output according to the OECD, and the UK’s productivity problem has led the OECD to downgrade its outlook on the UK just as the country enjoys its fastest growth rate in many years.
The think tank has just released its economic survey of the UK which reveals that low interest rates and improved access to credit have helped the recovery, but also warns that storm clouds are brewing for a nation living with weak exports, a shaky Eurozone and the current housing market. The OECD also has some concerns about the banking sector.
The biggest concern for the OECD was Britain’s poor record on productivity. The report finds overall that UK workers aren’t making improvements in efficiency. The boosting of productivity is a key challenge for the coming years according to the OECD. They believe that weak productivity is holding back living standards and improved pay.
When it comes to productivity Britain is lagging behind other G7 advanced economies and the OECD report explains: “Income and wealth are below the G7 average and real earnings have been exceptionally weak as they have continued to reflect poor productivity.” The OECD finds that Britain’s productivity gap is at its widest since 1992, when compared to other G7 countries.
The report continues to highlight issues facing Britain including education, skills, infrastructure and access to finance. The reports adds: “Weak export performance and productivity could be driven by infrastructure weaknesses and difficult access to bank finance, especially for small and medium-sized enterprises (SMEs), holding back the emergence of new firms and high-skilled jobs.”
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