Since the financial crisis of 2007/08, productivity growth has been lower than expected in the UK. This ‘productivity puzzle’ has been a long-term issue for the UK economy. In 2016 output per hour worked was 16.3% below the average for the rest of the G7.
The government’s industrial strategy, published in November 2017, made clear that raising productivity was one of its key priorities. The strategy focused on five foundations of productivity: ideas, people, infrastructure, business environment and place. As part of the strategy, the government has looked in-depth at the actions that are required to improve the productivity and growth of small and medium sized businesses. This review was published in May 2018.
In our response to the review, we make clear that design and design skills are key in making the UK more productive. Our evidence, from the Design Economy 2018, shows that when firms invest significantly in design they are more likely to invest in R&D and combine these activities to drive innovation. This innovation, particularly in process and performance, drives improvement in productivity.
We believe that to make the UK more productive, the government has to support and invest in design. One recommendation we make is that the government should pilot a research, design and development tax credit. The incentive would be targeted at businesses in the sectors with the lowest levels of productivity and the highest chances of automation (such as retail and administrative services) in places which are not currently investing sufficiently in design. Businesses which meet these criteria would benefit most from an uplift in productivity while creating more meaningful, higher value jobs in the process.
As Design Economy 2018 made clear, design will play an even bigger role in the future economy. Yet too few places, people and businesses benefit from the full potential of design. If we are to solve the ‘productivity puzzle’ and respond to the fourth industrial revolution we have to place design at the centre of our future economy.
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