Britain's Relative Productivity Performance: Has Anything Changed?

This paper summarises the results of a major revision of the data underlying a previous study of Britain's productivity position in an international perspective (O'Mahony, 1999). Thus it examines the productivity record of the UK relative to the US, France, and Germany. There have been a number of changes since the original study which necessitated a revision rather than a mere updating of previous estimates. These included changes to national accounts definitions of value added to include immaterial investments following the adoption of SNA93 by these countries, labour input revisions which allow the distinction between jobs and persons employed, extensive revisions to industrial classifications and the desire to present estimates for unified Germany rather than the former West Germany. In addition the data series were extended to include a division of capital stocks by asset type which allows for a more refined treatment of capital input in explaining relative labour productivity performance. Hence the first aim of this paper is to see if these changes have significantly altered perceptions of Britain's relative productivity position. The evidence on the extent to which Britain has improved its relative productivity position in the past decade is presented and the paper re-examines the issue of the impact of its investment record in both physical and human capital on Britain's labour productivity shortfall. Since the publication of the original study, much of the productivity literature has focused on the new economy and, in particular, the impact of information and communications technology (ICT) on productivity trends. The association between ICT and sector productivity growth rates is also considered below.