My family
and I just got back from a week in Greece. It’s a beautiful country with
wonderful people. But more importantly, almost all that we have today sprang
from that vibrant, innovative, intellectually brilliant culture – Democracy,
Mathematics, the Sciences, Philosophy, the arts. Sure there are other cultures
that have influenced the word a great deal from the romans, to ancient india,
china, then later the dutch and the British.
But the
Greek culture has had a disproportionate impact on the world we live in today. My
American wife, Catherine, often has quite a ‘new world take on issues’ – On
Greece, she also had a great insight ‘it’s amazing that this country was the
birthplace of so much that is exceptional in the modern world. Yet look at it
today, mired in unemployment, poverty, and with a failing political and economic
system.
And I got
thinking – what caused that decline? And I came to the conclusion that it was
declining innovation, and productivity growth.
Countries
need to keep innovating, and improving, to maintain their economic strength.
And without economic strength, no other can really persist. No country can
afford to rest on its laurels, otherwise they risk going from being the Greece
of the ancient world to the Greece of today.
Then I
started to think about three countries that I am most intimately acquainted
with – I have lived and worked extensively in all three countries. The
Netherlands, where I was born, and the home of my mother. The UK where I was
raised for much of my life, and where I went to university. And finally, the
USA, the country I moved to by choice – first, to study for an MBA, and then
raising a family and working there.
But my
experiences are one part of the story only. I will rely on data to inform me as
to my thesis on falling productivity. But there are other, rather wonderful
reasons why comparing the UK to the Netherlands, and the USA can provide such
powerful insights.
The USA has
the most free market Economy – the lowest taxes, the highest inequality (though
the UK is getting closer), and the least protective legislation (it varies from
state to state though – Massachusetts, is almost akin to the UK in workers
protection, whilst States like Florida, or Texas are truly the ‘wild west’ with
very little in the way of workers rights).
The
Netherlands is at the other end of the spectrum. It is very hard to fire
someone (as in France, or Germany). Workers are far more protected than in the
UK, and Dutch workers. 27 hours a week in the Netherlands versus 36 in the USA
and 31 in the UK. https://worldpopulationreview.com/country-rankings/average-work-week-by-country
It’s hard to
talk about large macro economic issues like productivity, without veering into
politics. When you start to talk about solutions to issues like low
productivity growth, it’s almost impossible to do so without talking politics.
However, I
am aiming to, as far as possible, avoid taking a political position. I am far
more interested in finding out what your views are on how to solve this
problem.
The Problem
– low productivity growth in the UK over the last twenty years, which has been
exacerbated by each crisis – from the 2008 financial crash, to Brexit, to the
Covid pandemic. UK productivity, already struggling, has been hit by each
crisis, and not recovered from them (in the way that the USA, has, for
example). Why is that?
So I have
two theories backed with extensive evidence, why the UK is
underperforming both a more free market economy like the USA, as well as a more
planned economy like the Netherlands. And one that is more of a conjecture, based on my personal experience and observations. However, I have tried to provide good data to support that theory as well.
Lack of
investment
My
experience of working in the US and the Netherlands bears out the hard
evidence, that business investment in the UK is very low and falling, and that
this is a major factor in our poor productivity growth. I’m not just talking
about investment in hardware, software or other work tools. There is very
little on the job training in the UK, versus in the US, or the Netherlands.
The numbers
behind that observation are stark. Whole-economy investment in the UK was just
18.9% of GDP in 2025 — the lowest in the G7. The US sits at 21.6%. The
Netherlands at 19.7%. A three-percentage-point gap against the US doesn’t sound
like much. But sustained year after year for two decades, it compounds into a
yawning chasm.
The
Institute for Public Policy Research went further in their April 2026 analysis.
They calculated a “capital gap” — how much less capital British workers have to
work with compared to peer countries. The answer: British workers have 38% less
capital per hour worked than the average of comparable economies. In
manufacturing specifically, the gap rises to 47% — versus a peer set of the
USA, Germany, France and the Netherlands.
British factory
workers are working with roughly half the machinery, equipment, robots and IT
systems that their American, German, French and Dutch counterparts have. Of
course they produce less per hour. They’re working with one hand tied behind
their back. (IPPR press release,
April 2026)
And it gets
worse on intangibles. The US invests 6.7% of GDP per year in software, IP, data
and organisational know-how. The UK invests just 4.2%. That gap is hugely
significant because intangibles — software, design, brand value, training,
R&D — are increasingly what drives productivity in a modern economy.
The US
has been quietly out-investing us in the very things that compound the fastest,
and the gap is widening, not closing.
Then there’s
the on-the-job training I mentioned. The hard numbers: British businesses spend
roughly half the EU average per worker on training and development. The
Chartered Management Institute reports that around 82% of UK training spend is
funded by employers themselves — and naturally, employers prioritise senior and
professional roles, not the middle managers and frontline workers who actually
run day-to-day operations.
The result is a workforce that doesn’t get developed
beyond what each individual chooses to invest in themselves.
In the
States, every employer I worked for had a real training budget — actual money
set aside to develop me. The Netherlands was the same. In the UK, not so much.
Poor
management
If I’m
honest, this is the one that surprised me most when I started digging. I’d
always vaguely assumed British management was a bit stuffy but basically fine.
It turns out, it isn’t.
There’s a
serious field of academic work measuring management quality across countries,
called the World Management Survey. It’s been running since 2002, led
by Nick Bloom (Stanford), John Van Reenen (LSE/MIT), and Raffaella Sadun
(Harvard). They’ve trained interviewers to score firms across 18 management
practices — things like target-setting, monitoring, talent development, and how
firms deal with poor performers — using structured interviews with middle
managers. They’ve now covered around 13,000 firms in 35 countries.
The results
aren’t kind to us.
The US comes
in first. Then Japan, Germany, Sweden and Canada. The Netherlands ranks sixth,
at 3.04 out of 5. The UK ranks seventh, at 2.95. The gap to the Netherlands is
small. The gap to the US is roughly half a standard deviation — which sounds
technical, but Andy Haldane (then chief economist at the Bank of England)
translated it in a memorable 2018 speech, “The UK’s Productivity
Problem: Hub No Spokes.”
UK management practices, he said, are about half a standard deviation
lower than comparator countries, and these management skills are statistically
significant determinants of productivity.
But here’s
what really matters: the headline average understates the problem. Haldane
showed that the UK has TWICE the share of firms with low management scores
compared to the US and Germany. We have plenty of world-class firms at the
frontier — but a long, fat tail of badly-managed companies that other countries
simply don’t have to anything like the same extent. And that tail has been
growing. Between 1997 and 2023, the number of UK firms below the 25th
productivity percentile nearly doubled, from around 444,500 to 873,000.
Why? My
theory — and this is where it gets uncomfortable — is that we’ve created a
class of “accidental managers.” The Chartered Management
Institute estimated
in 2023 that 82% of UK managers had no formal training before being put in
charge of people. In 2019 the figure was 68%. So it’s getting worse, not
better. We promote good individual contributors into management roles and just
expect them to figure it out.
The
downstream economic effects are brutal. A UK SME generates roughly £147,000 of
output per worker per year. A German SME generates £335,000. That’s more than
double. A UK business with ten employees could theoretically add £1.9 million
in annual turnover if it operated at German productivity levels. Now think
about how many small British firms are scraping by, when with better management
they’d be thriving.
How much of
the international productivity gap does management actually explain? Bloom and
colleagues estimated in 2016 that management practices account for roughly a
third of the productivity gap between the US and other countries — and up to
half for countries like Italy and Portugal. Management isn’t a soft factor.
It’s a major component of why the UK is falling behind.
When I
worked in the US, most of my managers had been trained — through MBAs, or
rotational programmes, or formal leadership development.
Lack of
cognitive diversity
Scott Page
(Michigan, complex systems) published the foundational paper with Lu Hong in
PNAS in 2004 showing, with proofs, that a randomly-selected group of diverse
problem-solvers outperforms a group composed of the highest-ability individual
solvers, on sufficiently complex tasks. Page shows that various types of
cognitive diversity — differences in how people perceive, encode, analyze, and
organize the same information and experiences — are linked to better outcomes. https://www.pnas.org/doi/10.1073/pnas.0403723101
My
experience of working in both the USA and the Netherlands, is that both
countries actively encourage looking at problems from different angles. The USA
has a culture of radical individualism. The idea of one person with a brilliant
new idea, breaking out of the tired status quo is at the heart of this culture
– from the American people rebelling against King George’s taxes without
representation, which lead to the war of independence, to Money Ball, where a
gifted economist shakes up the then tired game of Baseball.
Funnily
enough, the Netherlands, though very different in other ways, is quite similar
to the USA in that regard. When you have a work meeting, everyone puts in an
opinion – no one feels that their view is somehow less important due to their
status, or position in the company. It can make meetings quite hard to handle!
But you will never lack for good ideas.
I feel that
this is partially deeply rooted in our culture of elitism in the UK, compounded by Britain’s sometimes fatal reliance on conventional wisdom – which great
minds, from Napoleon, to most recently, Elon Musk, have commented on.
