Productivity in Britain has become the conversation nobody wants to have. Mention it and you can watch the entire Westminster–City ecosystem stiffen at once. Ministers mutter platitudes about “backing business”. Executives clutch their spreadsheets like rosary beads. Think tanks begin their usual incantations about “stability”. All the while the economy drags itself along like a tired milk float with a slow puncture and everyone insists this is perfectly normal.
We keep repeating the same hopeless rituals. A tweak to corporation tax here. A super-deduction there. A stern lecture on innovation delivered to an audience already halfway out of the door. It is all theatre. The state hands over money, firms applaud politely, nothing happens, and the Chancellor emerges to announce “long-term growth” like a man congratulating himself for buying a gym membership while living at the pub.
What nobody dares admit is the real reason productivity has flatlined. It isn’t cultural laziness. It isn’t regulation. It isn’t some mystical British aversion to efficiency. It is far simpler: too many British firms prioritise dividends over investment. Capital that should modernise machinery, sharpen processes, train people or fund R and D is instead pumped out in quarterly payouts to keep shareholders tranquil. Short-termism baked into the system.
Executives are rewarded for nudging the share price, not upgrading capability. Foreign owners want predictable returns, not national renewal. Private equity treats firms like oranges to be squeezed. And the costs fall not on them but on everyone else – the workers with outdated equipment, the consumers subsidising inefficiency, the state plugging gaps with tax incentives that get quietly converted into more dividends.
A proper productivity compact would finally force this country to behave like a grown-up economy again. Not a free-for-all cash splash, but a contract. A firm wants a boost? Fine. Show us your plan. Not the usual consultant slide-deck full of arrows and aspiration, but a concrete breakdown of what you will do, what you will change, and how it will measurably lift output per worker. Downtime, scrap rates, throughput, training hours, digital adoption, export performance. Whatever fits your sector, but measurable and genuine.
Then comes the shock to the British corporate system: the support is conditional. Hit your targets and you keep the benefit. Miss them and it evaporates before it reaches shareholder pockets. No more trousering public money and calling it “investment”. No more treating the exchequer like a dividend top-up. If you want a reward, earn it.
Cue the chorus of wailing. “Anti-business!” “Hostile to investment!” “Interventionism!” All the stock phrases trotted out by people who presided over the worst productivity stagnation in modern British history while insisting they were champions of enterprise. They forget that the real anti-business stance is to let the nation slide into decline while calling it a free market.
The detail is what makes this work. Sector-based metrics, not one-size-fits-all nonsense. Light-touch auditing that stops gaming without drowning SMEs in forms. Rebuilt state capacity so civil servants can tell a lathe from a logo. A timetable covering the full five-year parliamentary term, because transformation does not happen between budget speeches.
Then add a modest, sensible labour-side tweak: pensioners who choose to re-enter the workforce get a small tax reduction on earnings up to a capped level – £15k to £18k. Not a reward for second careers. Not a bung. A recognition that a day or two a week from an experienced, reliable worker keeps entire operations functioning. And it avoids the sector-policing madness because the cap does the filtering. No retired financier is going back to the City for a relief that only applies to modest part-time income. But people doing socially useful work will feel it. Simple. Clean. Effective.
Put all this together and you finally have something Britain has lacked for decades – a system that rewards investment over extraction. Productivity over payouts. Capability over complacency. It forces firms to show their workings. It nudges labour supply where it helps most. And it stops public policy being an ATM for dividends dressed up as growth.
The task is huge. Rebuilding capacity, resisting the lobbying machine, staying the course for five years, and daring to expect results. But the benefits are bigger still. Higher wages. A wider tax base. Stronger services. An economy that actually moves.
We either do this or settle into another decade of genteel stagnation while insisting that nothing can be done. Britain has coasted long enough. Time to stop mistaking drift for destiny.
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