On an output per worker basis, the level of UK productivity in 2003 was lower than all but two of the EU-15 Member States. In recent years, productivity growth has shown more promise, growing faster than in France and Germany, but not matching the impressive growth in some other Member States. The UK’s problems in this area are due largely to historical underinvestment in physical capital, a shortfall in intermediate skills among its workforce and, on average, a poor record of industrial management – while some UK firms are as productive as global leaders, many have failed to adopt and implement best-practice techniques.

In recent years, UK industry has invested heavily in ICT, leading many to ask if a US-style ICT-led spurt in productivity growth is imminent. Notwithstanding significant measurement problems associated with identifying the impact of ICT capital investment, there is some evidence to suggest that the UK has not yet realised the full benefit of this investment. Ultimately, however, the same factors which have contributed to the UK’s historically poor level of productivity are the key to improvedperformance – ICT, by itself, is unlikely to be the answer.