Brexit Could Be a Chance to Boost Britain’s Dire Productivity
(Bloomberg) -- The U.K. might take an economic hit from Brexit, but it’s also an opportunity for the country to address the slow growth of output from its workers, according to McKinsey.
The split “could provide policy makers with the impetus to boost productivity,” authors including Vivian Hunt and Daniel Mikkelsen said in a report. “The economic shock of leaving the European Union means there is a more urgent need to address long-standing constraints on the supply side.”
The U.K. has the second-lowest productivity among Group of Seven countries, well behind the U.S. and Germany, and two-thirds of working Britons are employed in firms where output-per-hour is below average. Economists and policy makers have been grappling with its inability to return to a pre-crisis growth rate for years.
The likely impact of Britain’s exit from the EU -- including a reduction in immigration and a lower availability of skills, weaker foreign-direct-investment and a decrease in trade -- will harm the productive, traded parts of the U.K. economy, the report said. Those include financial services, pharmaceuticals, and technology, and have accounted for the bulk of growth in the last decade.
The challenge is to support those sectors most hit by Brexit. That could be done by improving business practices such as leadership and talent management, boosting public-sector productivity and increasing the participation of women in paid labor, the authors said. If each region were to add women to the workforce at the fastest pace it achieved during the past 10 years, it could add 0.7 percent to gross domestic product per year for the next decade.