Productivity

Productivity is a measure of how well a society transforms work and other resources into products and services that improve people’s lives. Historically, productivity has trended upwards over time: more goods and services have been produced for the same level of input of resources, allowing living standards to rise.

But since 2007, productivity growth in the UK has stagnated. Had productivity in the UK grown in line with its previous trend, the UK economy would be approximately £300 billion larger today. Compared to many of the UK’s peer nations, such as France, the USA and Germany, UK productivity is lower, and by some estimates up to 20% lower.

Productivity research is one of ESRC’s most important priorities. Understanding and addressing the causes of this is the ultimate aim of ESRC’s investment in productivity research.

Raising productivity levels across the UK is a concern for many businesses and policy makers, but tackling it is a complex ‘wicked’ problem with no easy solutions.

In close collaboration with policy and business partners, we have developed an ambitious, innovative, and impactful productivity research agenda. In addition, this research has become more pressing given the need to support economic recovery in the context of the COVID-19 pandemic.

Strategic Priorities Fund (wave two)

In 2019, ESRC received £40 million from the Strategic Priorities Fund (wave two) to tackle the productivity puzzle, one of the most important issues for the UK economy. The projects detailed below describe the ways in which ESRC has targeted funding to promote productivity research.

The Productivity Institute

The £32 million Productivity Institute is headquartered at the Alliance Manchester Business School at the University of Manchester. The institute advances knowledge and informs the significant decisions by governments and business leaders aimed at increasing productivity. The institute is the largest single investment ever made by ESRC.

Video credit: ESRC
On-screen captions and an auto generated transcript is available on YouTube.

The Productivity Institute brings together world-leading experts from a range of disciplines and backgrounds. It works directly with policymakers and businesses to better understand, measure, and enable improvements in productivity across the whole of the UK. It looks at levelling up productivity across the whole of the UK, establishing regional research hubs that work with policy makers and businesses to understand the UK’s productivity context. It scales up local and regional findings to inform policy and practice that can be applied more broadly in a co-ordinated manner.

The institute includes eight partner institutions across the country:

  • universities of Glasgow, Sheffield, Cambridge and Warwick
  • King’s College London
  • Queen’s University Belfast
  • Cardiff University
  • National Institute of Economic and Social Research.

The institute has a wide range of policy partners at a regional, national and international level, including:

  • HM Treasury
  • Department for Business, Energy, Innovation and Skills (BEIS)
  • Bank of England
  • Local Government Association
  • LEP Network and individual regional LEPs
  • International Labour Organisation
  • OECD’s Directorate for Science, Technology and Innovation.

The institute began in September 2020 and will run for 60 months.

Programme on Innovation and Diffusion (POID)

POID is independent of The Productivity Institute but works complementarily of it. The £5 million programme is based at the London School of Economics (LSE). The programme is rooted in the argument that productivity growth rests ultimately upon two elements:

  • innovation: ideas that are new to the world
  • the diffusion of these ideas across the economy.

Video credit: ESRC
On-screen captions and an auto generated transcript is available on YouTube.

POID began in September 2020 and will run for 60 months.

Research to improve UK economic productivity

In 2022, seven projects were funded to fill gaps in ESRC’s productivity portfolio. The following projects start in April 2022 and will run for 36 months.

Productivity, Wages and the Labour Market

Institute for Fiscal Studies, £1,999,651.80

While employment remains high, many jobs are of low quality, offering little security and limited opportunities for learning and progression. This project aims to understand the interactions between skills, jobs and career progression, their combined role in driving inequalities in economic outcomes and their consequences for productivity. The role of policy in tackling inequalities in work and promoting good jobs, earnings progression and productivity will also be investigated.

Diversity and UK Firm Performance

University College London, £1,402,992.30

This project will explore the economic effects of diverse teams and workplaces, and the wider role of urban diversity, on entrepreneurship and firm-level innovation and productivity in the UK. The project will be co-produced together with partners from business, government and civil society. By analysing data from the Diffbot knowledge graph and using innovative methods, a unique data platform will be generated, that other researchers can use to develop new knowledge on diversity and productivity.

Diversity and Productivity: from Education to Work (DaPEW)

London School of Economics and Political Science, £1,986,782.59

This project will advance understanding of the barriers to creating a diverse workforce and provide new evidence on the benefits of diversity to business performance. The role of education as the ‘leaky pipeline’ will be considered, in which individuals from under-represented groups lose access to career opportunities, creating a substantial ‘lost potential’ of highly qualified individuals. The team will work with businesses to design and implement the recommendations from this interdisciplinary research.

Understanding how constraints on access to finance and under-investment impact on productivity growth in smaller firms

University of Derby, £1,978,136.50

This project will build a picture of the problems that small firms face accessing investment capital and increasing their productivity. This will enable policy makers and businesses to design new policies that will contribute towards higher rates of investment that can increase productivity growth across the UK. This will benefit the six million UK small business owners and their 16.8 million employees and their families.

Understanding how servitisation can impact UK economic productivity and environmental performance

Aston University, £1,849,275.15

The ‘servitisation’ of products describes the strategy of creating value by adding services to products or replacing a product with a service. This project will investigate how industry can respond to environmental challenges by being innovative and potentially changing business models. The newly generated insights on servitisation will help influence decisions around industrial policy associated with productivity and decarbonisation.

Productive and Inclusive Net Zero (PRINZ): opportunities and barriers in the transition to sustainable and equitable growth

Imperial College London, £1,967,054.15

The aim of this project is to inform, through multi-disciplinary empirical analysis, the UK debates on economic productivity, regional prosperity and the transition to net zero greenhouse gas emissions. By engaging with national and regional policy makers throughout the project, this research will inform the government’s approach.

Mental health and well-being practices, outcomes and productivity: a causal analysis

University of Warwick, £1,918,094.83

This project will investigate the impact of employee mental health and well-being on productivity. By adopting an interdisciplinary approach which brings together management studies and occupational psychology, the research will suggest new ways in which employers can support better mental health and well-being and boost productivity performance in a post pandemic UK.

Strategic Priorities Fund (wave one)

ESRC secured Strategic Priorities Fund investment (wave one) from UKRI in 2018 to encourage a broad range of researchers across the diversity of the social sciences to engage in productivity research. The following projects were funded:

Productivity Insights Network

The Productivity Insights Network (PIN) consisted of a network comprising researchers, business leaders and policy makers to generate and benefit from the latest research on improving productivity. With representatives and activity across the UK, PIN also built the capacity of researchers to carry out high quality productivity research, with particular focus on the needs of early career researchers.

Video credit: Productivity Insights Network
On-screen captions and an auto generated transcript is available on YouTube.

Management practices and employee engagement initiative

A considerable investment was made into understanding management practices and their effects on productivity. The PrOPEL Hub at the University of Strathclyde is a £1.56 million (ESRC contribution) co-ordination and evidence hub to lead this important research for 36 months.

Five research grants were funded at a total research council contribution of £3.8 million.

Aston University, Manchester Metropolitan, University of Strathclyde, University of Westminster, University of East Anglia, and Kings College London have all led a variety of successful research projects.

The projects started in February 2019 and are scheduled to run between 24 and 36 months.

Researchers from the Centre for Research in Ethnic Minority Entrepreneurship (CREME) at Aston University have won the ESRC Outstanding Business and Enterprise Celebrating Impact Prize 2021.

Other research projects

The following projects were also funded through wave one (more information can be found on UKRI’s Gateway to Research):

Mapping work by the Centre for the Understanding of Sustainable Prosperity at the University of Surrey on the role of energy infrastructure in UK labour productivity, and well-being and productivity.

A collaborative project between researchers at:

  • Centre for Competitive Advantage in the Global Economy at Warwick
  • Centre for Economic Performance and the Centre for Macroeconomics both at the London School of Economics.

The project will map the production, diffusion and drivers of future technologies.

A collaborative project between researchers at the Centre for the Evaluation of Complexity across the NEXUS at:

The project will identify those institutional and organisational arrangements at the regional level that tend to lead to the ‘good’ management of policy trade-offs associated with increasing productivity, and to make recommendations to policy makers based on this.

Further information

Email: productivity@esrc.ukri.org

Last updated: 31 March 2022

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