Productivity Engine: Preface

Productivity is measured by dividing the output of goods and services by the number of hours which people have worked.

Productivity growth is the foundation of rising living standards and
a thriving economy. Yet, like many advanced economies, the UK has experienced a troubling slowdown in productivity growth since the 2007-08 financial crisis. The UK feels overworked and underpaid. It is a simple recipe for the social and political upheaval of recent years.

The killer stat of this report is £8,600. The introduction outlines that the UK’s productivity gap since the Global Financial Crisis (GFC) has been significant. Before 2008, UK productivity ran at about 2% and aligned closely with wage inflation – the economy produces more, companies pass on profits in salaries. Since the GFC, it is closer to 0.5%. If the UK reverted to pre-GFC productivity levels today, in 10 years, annual salaries would be 20-25% higher than today, which could be as much as £8,600.

On first glance, that is an economic value, not a social value or of relevance to real estate, yet its impact is far wider than £8,600. For cities to be competitive, and attract investment and business activity, they need a healthy, skilled, and productive workforce, plus a wider social infrastructure that supports health, education, and social mobility. Real estate both influences and is impacted by city success.

Addressing this is one of the most pressing social challenges facing the country today. Debate on the UK economy tends to focus on inflation, interest rates and GDP growth. By comparison, productivity and its social impact receive little attention despite its fundamental importance to all of us. But in this latest groundbreaking Bidwells report, we also uncover the fundamental role that space plays in developing coherent strategies for solving our fundamental social problems.

Our Productivity Engine

To better understand the complex web of factors influencing productivity, we have developed a framework (see diagram below). At its core lie the four key types of space addressed in this report: Housing, Cities, Innovation, and Power & Infrastructure. These ‘first-order effects’ represent the primary

drivers of productivity that we believe are often overlooked or underappreciated in the national discourse. Radiating outward from these core topics are the ‘second-order effects’– the myriad factors that interact with and influence the primary drivers of productivity. These include critical elements such as skills, AI, education, health, transport, and digital connectivity.

At Bidwells, we are committed to playing our part in shaping a more productive economy across these sectors, markets we’ve served over almost two centuries. By embracing diverse talent, and expanding our firm’s national footprint, we want
to provide the UK’s most sustainable and innovative property advice, partnering with the companies and organisations leading the UK’s economy.

Shaping a more productive society

The Productivity Engine aims to make the crucial link between resources, productivity and, critically, social value, and highlights the significant role that real estate plays. Solving the UK’s housing shortage, finding new ways to power
infrastructure, better understanding new working patterns and improving the lives of young renters, should not just be a top economic priority for the next government - it should drive all of us.

While much of the productivity discussion focuses on economic measures, such as the potential £8,600 increase in individual income, we believe that the productivity conversation must extend beyond purely financial considerations. The happiness, health, and overall well-being of people are equally critical factors in building a truly productive society.