Going for Growth 2021 – United Kingdom

United Kingdom

Vulnerable social groups have been particularly affected by the pandemic and poverty is set to increase as jobs are lost and self-employed see incomes dwindle, accentuating regional differences. The COVID-19 crisis has emphasized the need to re-train and up-skill the population, secure access to affordable housing by reducing bottlenecks to supply and to revive investment.

united-kingdom-economy united-kingdom-inequality united-kingdom-environment

Economy: Percentage gap with respect to the population-weighted average of the highest 18 OECD countries in terms of GDP per capita (in constant 2015 PPPs).

Inequality: The Gini coefficient for disposable income measures the extent to which the distribution of disposable income among households deviates from perfect equal distribution. A value of zero represents perfect equality and a value of 100 extreme inequality.

Environment: Greenhouse gas (GHG) emissions include emissions or removals from land-use, land-use change and forestry (LULUCF). A high exposure to air pollution refers to above 10 μg/m3 of PM2.5.

Source: Economy: OECD, National Accounts, Productivity and Labour Force Statistics Databases; Inequality: OECD, Income Distribution Database and World Bank, World Development Indicators Database; Environment: OECD, Environment Database and United Nations Framework Convention on Climate Change (UNFCCC) Database.

Life-long learning and investment to ensure broad growth benefits

Given the pre-pandemic large skills gaps of the population and inequality concerns, funding for lifelong learning should be increased further. The United Kingdom has one of the highest shares of under-qualified workers among OECD countries while public and corporate spending on adult learning has declined, alongside participation in lifelong training. Support for job search, skills and apprenticeships, set out in July 2020, should be increased further, giving priority access to low-wage-low-skilled workers and good quality ICT trainings. Enhancing the overall access to Jobcentre Plus, the public employment service, and raising the quality and effectiveness of training programmes, would ease the impact of structural changes triggered by COVID and digitalisation (Panel A).

After decades of public under-investment, there is a considerable need to invest in infrastructure, including digital. Large investment is also needed to move toward a low-carbon economy and to tackle the long-standing challenge of narrowing regional differences, likely exacerbated by the COVID-19 crisis. The pandemic slowed private investment further, which has been weak since the 2016 referendum to leave the European Union (EU). Investment can be revived by maintaining low barriers to trade and investment with the EU and other trading partners. Easing land use regulations while balancing resource allocation, environmental and social concerns can also spur more investment in housing, improving housing affordability and competition in construction. The Government’s 2020 White paper on the issue is welcome and policy measures should follow. These should be complemented by making the temporary cut in the stamp duty permanent and reforming the regressive Council tax.

Vulnerabilities and areas for reform

vulnerabilities and areas for reform united kingdom
  1. For the United Kingdom, the latest year available is 2011.

  2. Second earner taking up employment at 67% of average wage with the first earner at the average wage.

High childcare costs continue to pose a hurdle to working mothers, who also took more responsibility for childcare during the lockdown (Panel B). Increasing support for full-time good-quality childcare would allow them to return to work. To leverage private sector innovation in emerging sectors and potentially “disruptive” technologies, ensure a balance between direct R&D support and tax incentives. Furthermore, channel the support also to smaller companies.

United Kingdom: Summary of Going for Growth priorities and recommendations

united kingdom summary of going for growth priorities and recommendations

Recent progress on structural reforms

The United Kingdom left the European Union 31 January 2020 and left the single market 31 December 2020, preparations for the exit have held up political and administrative capacity and reforms since the 2016 referendum. Lately, initiatives linked to the COVID-19 response and the Government’s plans to level up regions outside of the prosperous South-East England started addressing some long-term challenges, notably by boosting funding to public investment and skills and by outlining an overhaul of land-use regulations. However promising, these efforts need sustained attention and financing to address the underlying challenges.


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