The 'long tail' of low productivity firms will not be answer to the productivity puzzle, instead the focus should be on the firms that export goods and services locally and beyond.
The idea that a ‘long tail’ of unproductive businesses is the root cause of the UK’s productivity problems has captured the imagination of policy makers in recent years and been championed by economists at the Bank of England and OECD. The Government has now launched a new Business Productivity Review to help unproductive firms step up their performance, which it says could unlock £100 billion for the UK’s economy.
However, our analysis offers important new insights into the UK’s productivity problem, which suggest that the focus for policymakers should be less on underperforming firms and more on improving the performance of already highly-productive businesses in cities across the UK:
The report recommends that policy makers should take three approaches to improve productivity in the UK:
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