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The Actuary The magazine of the Institute & Faculty of Actuaries

UK jumps to 13th place for productivity potential

The United Kingdom has climbed up to 13th place from 14th a year ago in KPMG's Variables for Sustained Growth Index.

Relatively high potential for growth ©Shutterstock
Relatively high potential for growth ©Shutterstock

The index measures 181 different countries' productivity potential by considering areas such as education, technology, strength of institutions and infrastructure.

The UK obtained an overall score of 7.23, above the average score of 6.76 for G7 countries, however the impact of Brexit could put this at risk amid fears of lower trade and a reduction in skills due to lower EU migration.

KPMG head of macroeconomics, Yael Selfin, said: “The world experienced a number of surprises in 2016 signalling that globalisation as we knew it may no longer work. The subsequent impact on the world economy from less trade and reduced flows of people and ideas as a consequence of this could be significant.

“The result of the EU referendum means the UK is one of the countries likely to see the most change as part of this shift. The country needs to work harder than ever to demonstrate our doors remain open to the world.

“Those leading the charge on our international trade strategy need to make relationship building with global leaders a priority. This doesn’t just mean making new friends, it also means protecting where we can our relationship with the EU and the remaining EU countries. This is key because even after we Brexit, the bloc will continue to be an important trading partner for the UK.”

The top scoring 15 countries in the index are:

Source: KPMG
Source: KPMG

The UK ranks higher in the index than France (23rd), the US (24th) and China (55th), but lags behind Switzerland in first place, New Zealand (11th) and Germany (12th)

Britain scores particularly well in institutional strength and relatively high in its ability to attract foreign direct investment, however could do much better in education, ranking just 19th in this latest report.

KPMG UK chairman, Simon Collins, said: “Getting education right is critical to unlocking the country’s potential and closing the productivity gap. 

“Our research shows that education is one of the most important catalysts for improving productivity and we’ve already seen countries such as France and Hong Kong take big leaps forward by improving their school systems. However, the UK still lies outside the global top 10.

“Brexit gives us the chance to rethink how to design and build a winning economy and a more inclusive society. A highly skilled, innovative, creative economy will provide greater opportunities for more people. 

“However, in order to make this transition we need substantial investment and collaborative thinking between government, business, and educators to deliver the necessary skills for decades to come.”