The growth mindset

This briefing note sizes up the new Government’s growth agenda as it sets out to make the country the fastest-growing in the G7. We explore the key supply-side reforms focused on infrastructure, housing, and trade, and evaluate their potential impact on productivity, wages, and GDP over the next five years.  

Since the financial crisis, the UK’s productivity growth has lagged behind its peers. By June 2024, the level of UK productivity (output per hour worked) was 5 per cent lower than if it had kept pace with average growth seen in the rest of the G7, leaving average annual wages £1,700 short of where they might have been. The IMF forecasts that growth in GDP per capita will accelerate but remain 0.5 percentage points below the US on average over the next five years.  

To close the growth gap, the Government must boost the supply side. The announced reforms, if implemented properly, could close about half the gap, and potentially more if the government prioritises growth in its housing and trade policies.  Broader reforms in areas like skills, industrial policy, and a clear growth strategy are essential to delivering sustainable long-term improvements in productivity and living standards.