The significant productivity gap between UK and the US

Productivity is the key indicator of economic health - over the long haul, real income growth and hence living standards must follow the growth of labour productivity. But, as a new ESRC report, The UK's Productivity Gap: what research tells us and what we need to find out, confirms, there remains a significant productivity gap between the UK and the United States.

Lets just have a look on some examples, that prove us that there is productivity gap between UK and the US.

- In the market sector of the UK economy, output per hour worked - the most commonly used measure of labour productivity - is almost 40 per cent below that in the United States.

- The productivity gap between the UK and the United States is particularly evident in key services, including wholesale and retailing, hotels and restaurants and financial services. Indeed, just three sectors account for more than half of the gap.

There are the main  causes of the productive gap between UK and the US:

- competition. Productivity growth is highest in economy with greater product market competition - where less productive firms contract and close while new more productive ones open and grow; and where competitive pressures force existing firms to improve. In fact, competition in UK is less than competition in the US.

- capital investment. Capital investment plays an important role in productivity growth. UK has less physical capital per worker than the United States.

- skills. Skills play a very important role on the economy. UK is behind US in this area (graduate skills), instead of a big amount of universities in UK.

- innovation. New technologies are improving better in the US and also their using in the production is more spacious in the US than in UK.

- international trade relationships. As we know, that United States has larger relationships with other countries in the trade area that UK.