Mind the productivity gap: The public sector potential (PDF)

Report: This paper examines the productivity challenge in public services, highlighting opportunities for improvement to boost UK economic growth. Our analysis is based on thorough productivity, GDP, and public sector spending research.

In brief

• The UK economy has experienced nearly 20 years of salary stagnation, largely as a consequence of flat-lining productivity. Over the same period, the level of public expenditure has doubled.
• With public sector spending now accounting for approximately 44% of GDP, a more productive public sector is vital to achieving better productivity and a stronger UK economy overall.
• However, public sector productivity growth has underperformed the wider economy in recent years. Our analysis has found that if UK public sector productivity growth had kept pace with the private sector since 2019, UK GDP would have been 3% larger by the end of 2024. This means weak growth in public sector productivity is costing the economy around £80bn a year in lost output. If this relative weakness continues, the shortfall will widen to 5% of GDP by 2030, meaning around £170bn of lost output each year.
• Only when we truly understand where the issues lie, will we be in a position to target the right solutions. Not all areas of the public sector have been affected in the same way. Broader, cross-sector collaboration offers the chance to share learning and embed solutions that could have a meaningful impact on productivity and the wider health of the UK economy now.