Productivity Institute to help boost growth and level-up living standards

  • University of Sheffield part of new research initiative to solve the UK’s productivity puzzle
  • Government commits £26 million to help Productivity Institute academics better understand, measure and enable nationwide improvements in productivity
  • Research will help to improve living standards for people across Sheffield City Region

Professor Philip McCann

The University of Sheffield is to be part of a targeted research institute that will help solve the UK’s productivity puzzle which could mean better jobs and higher living standards.

The £32 million Productivity Institute will advance knowledge and ensure it informs the significant decisions by governments and business leaders that can increase productivity.

The new £32 million Productivity Institute is being funded by £26 million from the Economic and Social Research Council (ESRC), as part of its largest ever single investment in social science, and £6 million from nine partner institutions – including the University of Sheffield – for five years, from 1 September 2020.

The Productivity Institute, headquartered at the Alliance Manchester Business School at the University of Manchester, will be led by Professor Bart van Ark and includes over 40 co-investigators who are world-renowned experts in their fields, including Professor Philip McCann of the University of Sheffield.

This knowledge will also prove invaluable for better understanding the economic drivers of our own Sheffield City Region, and ultimately improving living standards for local people.

professor philip mccann, professor of urban and regional economics at the university of sheffield

Science Minister Amanda Solloway said: “Improving productivity is central to driving forward our long-term economic recovery and ensuring that we level-up wages and living standards across every part of the UK.

“The new Productivity Institute will bring together the very best of our researchers, boosting our understanding of the different drivers of productivity and helping people and businesses earn more in every area of our economy.”

Professor Philip McCann, Professor of Urban and Regional Economics at the University of Sheffield, said: “We will be working with partners across the Productivity Institute led by Manchester, alongside researchers at the National Institute for Economic and Social Research, Oxford Brookes and other centres in order to build the evidence base. This knowledge will also prove invaluable for better understanding the economic drivers of our own Sheffield City Region, and ultimately improving living standards for local people.”

ESRC’s Executive Chair, Professor Jennifer Rubin, said: “The Institute at Manchester addresses what is arguably the UK’s biggest economic challenge. This funding represents the largest economic and social research investment ever in the UK, befitting its enormous potential to improve lives for millions of people.

“The Institute and programme will address low productivity by traditional measures, but also go beyond these measures to explore wider issues, including variation across places and what can be done to improve productivity for the UK as a whole; the importance of delivering a low carbon economy; relationships between well-being, productivity and skills; and the need for new ways of measuring productivity in a changing economic, technological and environmental context.

“The aim is to ensure that advances in knowledge inform the significant decisions and interventions that policy makers, businesses and individuals must make to improve productivity, and to achieve the attendant improvements in wages and living conditions that doing so can drive.”

Professor Bart van Ark, Managing Director of the new Institute at Alliance Manchester Business School, said: “For many years the UK has grappled with how to create better jobs and boost productivity, thereby increasing people’s prosperity around the country. The Covid-19 recession makes it time for a fresh look at these challenges.

“If we are to reboot the economy we need jobs that create high value, use economic and natural resources efficiently, and drive sustained growth through technological change and innovation. Productive jobs will pay more and improve people’s wellbeing.

“Working closely with businesses, policymakers and other stakeholders across the nation, and learning lessons from other countries, we aim through our research and engagement to develop practices and policies to encourage more productive and inclusive growth across the UK.”

Productivity is a measure of how well a society transforms work and other resources into products and services that improve people’s lives. Historically, productivity has trended upwards over time: more goods and services have been produced for the same level of input of resources, allowing living standards to rise.

But since 2007, productivity growth in the UK has stagnated. Had productivity in the UK grown in line with its previous trend, the UK economy would be approximately £300 billion larger today. Compared to many of the UK’s peer nations, such as France, the US and Germany, UK productivity is by some estimates up to 20 per cent lower.

Understanding and addressing the causes of this is the ultimate aim of ESRC’s investment in productivity research. In addition, this research has become more pressing given the need to support economic recovery in the context of the Covid-19 pandemic.

Funding for both the institute and the research programme is through UK Research and Innovation’s Strategic Priorities Fund, and will run for five years, starting on 1 September 2020.

The Productivity Institute

The Productivity Institute will bring together world-leading experts from a range of disciplines and backgrounds, and will work directly with policymakers and businesses to better understand, measure, and enable improvements in productivity across the whole of the UK. It will lead to a step-change in the quality and quantity of research available in the UK that will directly inform government policy to improve UK productivity. ESRC is providing £26 million of funding, while the Alliance Manchester Business School-led consortium is providing £6 million.

The institute will include eight partner institutions across the country: University of Sheffield, University of Glasgow, University of Cambridge, King’s College London, Queen’s University Belfast, Cardiff University, University of Warwick, and the National Institute of Economic and Social Research. It will be led by Professor van Ark and includes over 40 co-investigators who are world-renowned experts in their fields, including Professor Anthony Venables of the University of Oxford, Professor Philip McCann of the University of Sheffield, and Professor Diane Coyle of the University of Cambridge.

These new investments align with ESRC’s Delivery Plan, which names ‘Transforming Productivity’ within the Productivity, Prosperity and Growth priority area.

They also complement ESRC’s existing investments in the Productivity Insights Network (PIN), the Enterprise Research Centre, the What Works Centre for Local Economic Growth, and the Productivity Outcomes of Workplace Practice, Engagement and Learning (PrOPEL) Hub, a multi-disciplinary hub at Strathclyde Business School.

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