OUR Britannia is on the verge of a recession that will last until 2024, according to her estimates Bank of England. But the country’s predicament runs deeper than a simple shortening of the business cycle. Since 2008, the UK has experienced a sharp decline in productivity, and to address this problem, the Prime Minister Rishi Sunak forced to take unpopular measures. Poor productivity in Britain – output per hour worked – is holding back investment and limiting growth, driving down wages. After keeping pace with other developed countries for decades, UK labor productivity has risen by 0.3% a year since 2008. according to the Organization for Economic Cooperation and Development. In 2021, British workers produced 20% less than their US counterparts. Closing the gap requires improved education and training of the workforce. The country also needs to increase investment in new technologies such as automation in the manufacturing sector. In 2021, gross fixed capital formation, a measure of investment, was 17% of UK GDP, compared to 24% in France and 21% in the US, according to the World Bank. To reach the average of the other G7 countries, Britain will need an additional £115bn a year. The government already plans to maintain public sector net investment at around 2.5% of GDP over the next five years, in line with peers.

Of course, the challenge is to convince companies to invest more. Allowing them to offset new investments with taxes would be more effective than a universal corporate tax cut. United Kingdom. he already offers such incentives, but he needs to get bolder. Despite a longstanding R&D program, UK businesses still fund only 55% of the total costs of the process, down from 63% in the US, according to a study from the University of Cambridge. Providing tax incentives for a wider range of intellectual property and capital investments can help. Another simple move would be to extend the coronavirus-era “super deduction” that allows companies to offset 130% of investments through taxes – an agreement that expires in April. To finance such investment incentives, Sunak could tax wealth.

Private wealth has risen from three times GDP to almost eight times since 1965, but taxes on wealth, capital gains, inheritance and financial transactions have leveled off at about 2 percent of GDP, according to the Resolution Foundation. Doubling the tax rate would bring the treasury about £45 billion. This may not please voters in the UK. However, unless Rishi Sunak himself or his likely successor, Labor leader Keir Starmer, takes decisive action, Britain’s economic malaise will continue.