Economy

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Europe’s patience with Benjamin Netanyahu’s war in Gaza and Israeli settlers’ aggression in the occupied West Bank may finally be running out. In the past few weeks, EU foreign ministers have triggered a review of Israel’s association agreement with the bloc, Britain has halted trade talks, Norway’s sovereign wealth fund blacklisted an Israeli company for facilitating energy deliveries to West Bank settlements, and the leaders of France, the UK and Canada threatened to put sanctions on the country. Even Germany, Israel’s most stalwart backer in Europe, is criticising the country’s conduct.Too little too late, some will say. And they will point to how fast the west imposed sanctions on Russia, in meaningful and unprecedented ways, after Vladimir Putin’s full-scale invasion of Ukraine, and put the difference down to hypocrisy. No doubt the west has treated Russia and Israel differently, and hypocrisy is part of it. But an analogy to the war in Ukraine is also misguided. Russia never faced a campaign against its very existence, nor a heinous attack by Ukraine the way Israel did at the hands of Hamas.But this simple comparison misses the point. It is possible — indeed sensible — to think Israel is entitled to wage war against Hamas in Gaza, while insisting that it may only do so in lawful ways and concluding that these lawful limits have long since been transgressed. Indeed, the UN has found overwhelming evidence of Israeli war crimes and crimes against humanity in Gaza and in connection with the increasingly brutal occupation of the West Bank.There is no need, in other words, to deem the two wars in any way equivalent to judge that sanctions may be justified in both. And that is why it is time for Europe to clarify specifically how it might place sanctions on Israel, and to develop its ad hoc sanctions decisions into a systematic policy framework for how to use this geoeconomic tool generally.On the specifics, it is obvious that if European countries opt for sanctions, they will have to do so without the US. So the time is right to map out the areas where sanctions on Israel by Europe alone (or with any other willing allies) would have the most impact.Banking and financial sanctions are mostly likely to be ineffective, as the US can easily duplicate any payment and funding channels. There is one exception: immobilising foreign exchange reserves, as the west has done with Russia, would impose an economic cost. The Bank of Israel invests about a quarter of its relatively large stock of reserves in Europe, which a freeze would make unavailable for their financial stabilisation function and could in time be put towards any compensation due to Palestinians.The hardest-hitting sanctions would probably be on trade and travel. Israel sources nearly half of its goods imports from Europe and sends more than a third of its exports to the continent, according to its statistics bureau. A significant share of the imports consists of fuels, a trade Europe has outsize influence over due to its dominance of shipping-related services. At least a quarter of Israel’s large services trade is also with European markets. Restrictions on business services and tourism would be highly disruptive.Preparing for sanctions is important beyond the immediate moral and political imperative of reacting to violations of international law. The EU, in particular, needs to upgrade sanctions decision-making. Its strong measures against Russia have happened despite political squabbles and claims of legal uncertainty. These shortcomings, even though they have been repeatedly overcome against Moscow, will continue to hamper the union’s ability to project diplomatic power. The EU needs to clarify and systematise which behaviours will trigger which reactions, and ideally remove decisions regarding sanctions from the current unanimity requirement, which undermines its foreign policy leverage.Preparations are also needed to counter any US sabotage, which is already under way with Washington’s debilitating moves against the International Criminal Court.By showing it is ready to act against Israel if it so chooses, the EU would show it is ready to act against grave breaches of international law by anyone. Legal consistency would make threats of sanctions more credible; incentives to respect European red lines would strengthen them and signal consequences for crossing them.It was a US president who advised speaking softly and carrying a big stick. Today, it is the EU that can make most of his [email protected] More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Stanley Fischer, a former top policymaker at the US Federal Reserve and the Bank of Israel whose thinking was highly influential among generations of economists, has died at the age of 81.A former vice-chair of the Fed, Fischer also served at the IMF, where as first deputy managing director he worked on the response to the Asian and Russian crises of the late 1990s. He also served as chief economist at the World Bank. Fischer’s death was announced on Sunday by the Bank of Israel, where he served as governor from 2005 to 2013. The country’s president Isaac Herzog paid tribute to him as “a world-class professional, a man of integrity, with a heart of gold”. While he attained some of the most senior positions in global economics, Fischer’s career was no less significant because of his academic and teaching work, including at Massachusetts Institute of Technology. Former European Central Bank president Mario Draghi and former Fed chair Ben Bernanke were among the students whose PhD dissertations he helped supervise. “The human dimension of Stan’s work was as impressive and impactful as his brilliant economic analysis and his remarkable communication skills,” said Mohamed El-Erian, president of Queens’ College Cambridge and chief economic adviser at Allianz. “This quality was consistently evident — whether in his approach to individual country reform cases, his pursuit of a comprehensive, durable, and just peace in the Middle East or his contributions to the functioning of the international economic order.”Fischer, a citizen of the US and Israel, was born in Zambia and described himself as ‘a product of the British empire’ More

This article is an on-site version of our The Week Ahead newsletter. Subscribers can sign up here to get the newsletter delivered every Sunday. Explore all of our newsletters hereHello and welcome to the working week.It’s decision time on a number of fronts during the next seven days. I’ll start with South Korea, which will on Tuesday elect a new president at a crucial time for Asia’s fourth-largest economy. South Korea is wrestling with slowing growth while being battered by global trade tensions. The clear frontrunner, according to the polls, is the 61-year-old leftwinger Lee Jae-myung of the Democratic Party of Korea. Meanwhile, the ruling right of centre People Power party has fallen into disarray, largely due to its reluctance to break with disgraced former PPP president Yoon Suk Yeol, a hardline former prosecutor who was impeached halfway through his five-year term and subsequently removed following his ill-fated martial law declaration last year. Whoever triumphs on Tuesday will have to grapple with a slowing economy under pressure from the effects of US President Donald Trump’s aggressive trade policies, as well as a North Korea emboldened by its growing nuclear arsenal and its blossoming relationship with Vladimir Putin’s Russia. For more on that, read this.The Eurozone will be making both economic and political choices this week. On Wednesday, the European Commission is expected to publish its long-awaited view on whether Bulgaria is ready to adopt the euro. Bulgaria’s Prime Minister Rosen Zhelyazkov is confident of getting the green light and making the currency legal tender as soon as January 1 2026.The other bit of euro news this week will be from Frankfurt, where the European Central Bank’s rate-setting committee has a decision to make. The hawks have been lining up to urge caution, but a 25 basis points cut is taken as a given, priced in at close to 100 per cent probability, according to Reuters. Want to keep up to date with interest rates (and inflation) globally? The FT has a tracker for that.In UK politics, the choice is more between guns and butter as we await the publication of the government’s strategic defence review on Monday, which will outline new threats, the capabilities needed to tackle them, the state of the British armed forces and the resources available. The answer to that last question is likely to be not much. The overall solution, like the answer to so many of life’s modern questions it seems, is to go digital.Some decisions are already made, but need backing. With this in mind Canadian Prime Minister Mark Carney is heading to Saskatoon on Monday, hoping to nurture a love-in among the first ministers of the Canadian provinces and push his “strongest economy in the G7” ambition. A key goal in this effort (led by Canada’s minister for transport and internal trade, and former FT deputy editor, Chrystia Freeland) is to exorcise federal trade barriers, estimated to cost the economy $200bn a year, by July 1 (Canada Day). Carney is also expected to outline “One Canadian Economy” legislation to fast track projects such as ports, critical mineral mines and trade corridors.The corporate results trickle through again, bulging in the middle of the week. It’s a similar story for the economic reports, the most notable being US employment figures, the OECD economic outlook and the purchasing managers’ index (PMI) comparisons between the larger economies. More details below.One more thing . . . Some of us were turned on to computer gaming by Sinclair’s ZX Spectrum. For my Gen Z kids, it was the Nintendo Switch. This will be a momentous week for them (and one in which I feel the generation gap yawning ever wider) as Nintendo launches its much anticipated next-generation Switch 2 games console with forecasts of 15mn unit sales in the company’s current financial year. The new machine promises a larger screen, upgraded magnetic controllers, called Joy-Cons, and a new chat function. The only feature I wish for them to keep is the app that enables me to see how much time my offspring spend on the device when they might have been studying.Are you excited about a new games console? Can Nintendo top the communal shout fest that is Super Smash Bros? Email me at [email protected] or, if you are reading this from your inbox, hit reply.Key economic and company reportsHere is a more complete list of what to expect in terms of company reports and economic data this week.MondayUS Federal Reserve board member Christopher Waller speaks on the economic outlook at the 2025 Bank of Korea International Conference: Structural Shifts and Monetary Policy, in SeoulCatherine Mann, a Monetary Policy Committee member at the Bank of England, joins a fireside chat at the Federal Reserve Board of Governors IF 75th anniversary conference in WashingtonCanada, Eurozone, France, Germany, India, Italy, Japan, UK, US: S&P Global/HCOB/HSBC May manufacturing purchasing managers’ index (PMI) dataChina: Dragon Boat Festival holiday (Tuen Ng). Financial markets closed.UK: British Retail Consortium May Economic Monitor report and Nationwide May House Price IndexResults: The Campbell’s Company Q3, Sirius Real Estate FYTuesdayBank of Japan governor Kazuo Ueda gives a speech at the Naigai Josei Chosa Kai meeting in Japan.Sarah Hunter, assistant governor (economic) at the Reserve Bank of Australia gives a keynote speech at the Economic Society of Australia Queensland Business Lunch in BrisbaneDe La Rue shareholders to vote on the proposed takeover of the company by Atlas at a general meeting. If approved, the deal will become effective on July 2OECD Economic OutlookChina: Caixin May manufacturing PMI dataEU: flash May inflation estimate and April unemployment dataUS: April Job Openings and Labor Turnover (Jolts) dataResults: British American Tobacco HY trading statement, Chemring HY, CrowdStrike Q1, Dollar General Q1, FD Technologies FY, Ferguson Q3, Hewlett Packard Enterprise Q2, Pennon FYWednesdayAustralia: Q1 GDP estimateCanada: interest rate announcementCanada, Eurozone, France, Germany, India, Italy, Japan, UK, US: S&P Global/HCOB/HSBC May services PMI dataUK: International Reserves dataUS: Beige Book publishedResults: B&M European Value Retail FY, Descartes Systems Q1, DiscoverIE FY, Dollar Tree Q1, Empiric Student Property AGM and Q1 trading statement, Ninety One FY, Paragon Banking Group HY, Seraphim Space Investment Trust Q3, WHSmith trading statementThursdayNintendo releases its new Switch 2 games console, featuring a bigger screen and better graphics than its highly popular predecessor. The company is forecasting sales of 15mn in the new product’s first year, despite US tariffsEcondat’s two-day spring meeting at King’s College London, where central bankers and researchers will gather to discuss the economics involved in non-traditional data and analytical tools.The CBI National Business Dinner is held in London, traditionally addressed by a senior member of the governmentChina: Caixin May services PMI dataEurozone, France, Germany, Italy, UK: S&P Global/HCOB construction PMI dataEU: European Central Bank interest rate announcementGermany: April manufacturing orders dataUK: May Decision Maker Panel researchUS: April international trade in goods and servicesResults: Broadcom Q2, Brown-Forman Q4, Ciena Q2, CMC Markets FY, Dr Martens FY, Lululemon Athletica Q1, Mitie FY, PVH Q1, Samsara Q1, Victoria’s Secret Q1, Wise FY, Wizz Air FY, Workspace FYFridayEU: Q1 GDP estimateJapan: Consumption Activity IndexSouth Korea: Memorial Day. Financial markets closedUK: Halifax House Price IndexUS: May employment reportResults: ABM Q2World eventsFinally, here is a rundown of other events and milestones this week. MondayCanada: Prime Minister Mark Carney joins the elected heads of the north American country’s provinces at the Meeting of First Ministers in SaskatoonPoland: two-day EU-US Justice and Home Affairs ministerial meeting begins in WarsawUK: government publishes its strategic defence reviewTuesdayAustria: Vienna hosts the Austrian World Summit. The event, now in its ninth year, is organised by the Schwarzenegger Climate Initiative, a body created by the Austrian-American actor Arnold SchwarzeneggerSouth Korea: presidential electionWednesdayThursday50th anniversary of the UK voting to join the Common Market, which later became the EU, in a national referendum. It voted to leave the EU in 2016Naksa Day observed by Palestinians to recognise the “Day of the Setback” in 1967 when Israel won the six-day war, taking control of the West Bank and Gaza Strip resulting in thousands of Palestinians being displacedBelgium: Nato defence ministers meeting in BrusselsBurundi: parliamentary and local electionsUK: start of the fifth London Design Biennial, showcasing the role of design in solving challenges. This year’s theme is Surface ReflectionsFridayEid al-Adha, the second of the two main festivals in Islam, begins this evening. Celebrations and observances are generally carried forward to the three following days, known as the Tashreeq days.SaturdayFrance: Roland-Garros French Open 2025 tennis women’s singles final day in Paris. The men’s final will take place on SundayUK: 13th Liverpool Biennial, Britain’s largest free contemporary visual arts festival, begins. Events will take place across the city’s public spaces, galleries and museums until September 14 under the theme BedrockSundayGermany: Uefa Nations League final, concluding the fourth edition of the international men’s football tournamentUS: 78th Tony Awards for the American theatre industry, presented in New York’s Radio City Music HallRecommended newsletters for youWhite House Watch — What Trump’s second term means for Washington, business and the world. Sign up hereFT Opinion — Insights and judgments from top commentators. Sign up here More

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldTreasury secretary Scott Bessent has insisted the US would never default on its debt as he sought to assuage Wall Street concerns over the state of the country’s public finances. “The United States of America is never going to default, that is never going to happen,” Bessent told CBS’s Face the Nation on Sunday. “We are on the warning track and we will never hit the wall.”Investor jitters over the size of the US federal debt have mounted as President Donald Trump has urged Congress to push through his “big beautiful” budget bill, which is expected to ratchet up the federal deficit.Bessent dismissed concerns raised by JPMorgan Chase chief executive Jamie Dimon on Friday that the US bond market would “crack” under the weight of the country’s rising debt. “I have known Jamie a long time and for his entire career he’s made predictions like this. Fortunately, none of them have come true,” he said.The Congressional Budget Office, the government’s fiscal watchdog, warned in March that, even without the new budget legislation, US debt as a share of GDP would exceed its 1940s peak in the coming years. Last month, rating agency Moody’s stripped the US of its triple A debt rating.The Committee for a Responsible Federal Budget has warned that, as written, Trump’s bill would add about $3tn in debt over the next decade.Investors are also worried that the issue of raising the debt ceiling — which would increase by $4tn under the proposed legislation — is now beholden to Congressional wrangling and Republican party infighting. The bill passed the House of Representatives last month and is set to be debated by the Senate. But some members of the upper chamber have expressed unease over both the high spending levels and the scale of the increase to the debt limit.Elon Musk, who this week stepped down from his role in the Trump administration, said in a CBS interview aired on Sunday that he was “disappointed” with the “massive spending bill”, which he said undermined the cost-cutting work of his so-called Department of Government Efficiency. The Trump administration has insisted the bill will not increase the deficit and that projections fail to take into account increases in economic growth. “I am telling you this is going to reduce the deficit,” Mike Johnson, Speaker of the House of Representatives, told NBC’s Meet the Press on Sunday. “We are going to spur on tremendous economic growth here.”Bessent said that many projections had also not accounted for the “substantial” income boost from Trump’s sweeping new import tariffs, which could add trillions of dollars to government revenues. “The deficit this year is going to be lower than the deficit last year and in two years, it will be lower again,” said Bessent. Trump’s tariff plans hit a hurdle last week after a court ruled the president did not have the authority he relied on to impose most of the levies. The White House won a temporary stay against the order. Commerce secretary Howard Lutnick said that even if the president was blocked from imposing tariffs under certain powers, he would find other avenues to do so. “Rest assured, tariffs are not going away,” Lutnick told Fox News Sunday.“He has so many other authorities that even in the weird and unusual circumstance where this was taken away, we just bring on another or another or another.” More

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldJonathan Reynolds, UK business and trade secretary, will next week urge Donald Trump’s administration to quickly put in place a deal to cut taxes on UK steel exports to zero, even after the US president vowed to double his global steel tariff to 50 per cent.British officials admit there is still no “clarity” about how Trump’s new 50 per cent tariff on steel and aluminium imports — due to take effect on Wednesday — will hit the UK steel sector and its £400mn of exports to the US.But the outlook does not look good, with UK officials admitting that “bringing trade deals into force normally takes several months”. Trump and Prime Minister Sir Keir Starmer signed their non-legally binding trade pact on May 8, but London is still waiting for a clear signal from Washington about when it might take effect.Reynolds will meet Jamieson Greer, US trade representative, in Paris on the margins of an OECD meeting next week in a bid to thrash out “timelines” for implementing the so-called Economic Prosperity Deal.After clinching the first accord on trade with the US since Trump started imposing high tariffs, Starmer hailed it as a major coup.“The steel situation is still unclear,” said one British official, while another said there was a particular focus on London to persuade Trump to accelerate a separate agreement to cut tariffs on UK cars.Gareth Stace, director-general of the UK Steel trade body, warned that Trump’s plan to double steel and aluminium tariffs from 25 per cent to 50 per cent was “a body blow”.“Uncertainty remains as to whether and when our second-biggest export market will be open for business or is being firmly shut in our faces,” he added.  Trump agreed on May 8 to cut a 27.5 per cent tariff on cars to 10 per cent for the first 100,000 vehicles shipped from the UK, an agreement that Starmer said would save jobs at carmakers including Jaguar Land Rover.The prime minister also said at the time that the US had agreed to lower tariffs on UK steel and aluminium exports to zero, but they are set at 25 per cent at present.In return for cuts to Trump’s tariffs, the UK granted the US greater market access for beef, ethanol and industrial products. None of the proposed tariff cuts on either side of the Atlantic has yet taken effect.The UK government said: “We are working to ensure that businesses can benefit from the deal as quickly as possible and will confirm next steps in due course.“The US will need to follow due process on their side, and we will work with them very closely so that this happens as quickly as possible in the coming weeks.“The Economic Prosperity Deal and any implementing legislation will be presented to parliament in due course.” Officials in the UK embassy in Washington are working with the US Department of Commerce to try to expedite the enactment of the accord. One British official said: “The original deal stands, in our view.”Trump’s sectoral tariffs on cars and steel were not affected by the US Court of International Trade’s decision on Wednesday that the “liberation day” tariff scheme was illegal — a ruling later paused by a US federal appeals court. But trade experts warn that the US president will now be distracted by his battle in the courts and is unlikely to be focused on a trade deal with Britain.  More

Stay informed with free updatesSimply sign up to the More

This article is an on-site version of Free Lunch newsletter. Premium subscribers can sign up here to get the newsletter delivered every Thursday and Sunday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersWelcome back. Britain’s weak productivity growth has been scrutinised for well over a decade. It has spawned a sub-industry of research into its causes, splicing the problem by firm size, sector and region. The main culprits for Britain’s sluggishness have, however, remained mostly the same.So this week, I argue that there is no “productivity puzzle” in the UK.Economists tend to model a nation’s output capacity as a function of capital, labour and how efficiently it combines the two (also known as total- or multi-factor productivity). Output per hour worked is the most common measure of productivity.The slowdown in productivity growth following the global financial crisis is a worldwide phenomenon. But relative to its solid trajectory before, the UK’s drop-off has been starker.“Around one-third of the slowdown is a result of weaker capital per worker,” says Bart van Ark, managing director at the UK-based Productivity Institute. “The other two-thirds comes from poorer contributions from total-factor productivity.”Indeed, in the aftermath of the 2008 downturn, UK businesses expanded their production capacity mainly by increasing labour inputs. But in that period, broader efficiency improvements and investment lagged behind. Right now, Britain ranks middle of the G7 for productivity, with GDP per hour worked on a purchasing power parity basis around 20 per cent below the US. Some content could not load. Check your internet connection or browser settings.“UK workers have to make do with a third less capital per hour than their counterparts in higher-productivity peer countries,” says Tera Allas, senior adviser to McKinsey. “This has accumulated from decades of under-investment in equipment, research and development, training and infrastructure, by both the public and private sector.”In the past decade, business investment has also suffered from heightened economic uncertainty. This includes years of to-and-fro Brexit negotiations following the 2016 referendum, political turbulence (including six chancellors between 2019 and 2022), and a particularly tough pandemic period. Some content could not load. Check your internet connection or browser settings.As for poor TFP growth, there are multiple explanatory factors. For starters, poor investment can worsen efficiency outcomes over time. Using old technology impedes knock-on innovation. Infrastructure wears and tears, and can get clogged up as the population expands.“Every French city with a population greater than 150,000 has a mass transit system (tram or metro), while there are 30 British towns and cities that large that go without,” notes Ben Hopkinson, head of research at Britain Remade.Weak management skills are another challenge. A recent study finds that domestic manufacturing firms become, on average, 4.9 per cent more productive and 23.3 per cent more capital-intensive after hiring foreign managers. “The diffusion of best practices and technology across businesses and especially regions is also slower in Britain,” adds van Ark.Next, although English adults outperform the OECD average for literacy, numeracy and problem-solving skills, the country is the worst among rich nations at matching workers to jobs at the appropriate qualification level. More than a third of all vacancies in 2022 were the result of skill shortages, according to a Department for Education survey. Again, this is partly a function of investment, not just in absolute terms, but also in its distribution across the country. “By failing to build homes in and around our most productive cities, workers are priced out of living near well-paying jobs,” says Hopkinson. “The lack of reliable mass transit shrinks the effective size of our cities by limiting who can easily get to the city centre.”How capital is allocated also matters. In Britain, pension funds have been shifting money away from UK equities towards bonds for over two decades. This shift has not occurred in other major pension markets. This, alongside broader challenges in finding venture capital, has long sapped domestic companies’ ability to scale. Some content could not load. Check your internet connection or browser settings.Then there is red tape. For measure, the UK’s tax code comes in at 22,000 pages, more than any other country in the world. The Federation of Small Businesses estimates that a small company spends 44 hours per year on average on tax administration, at a total annual cost of around £25bn across all small enterprises.The code itself contains numerous inefficiencies that distort work, growth and investment incentives, including cliff-edges in income tax and business valued-added tax thresholds, and transaction taxes on property and stocks. UK tax expert Dan Neidle outlines these here.Building also requires hefty paperwork, which slows projects. As Britain Remade found, reopening a 3.3-mile train line to Portishead from Bristol took 79,187 pages of planning documents. Printed out, that’s 14.6 miles of paperwork — 4.5 times the length of the actual railway. The process has taken 16 years so far. (Construction should start soon.)There are two broader macro factors that tend to get lost in all the TFP microanalyses.First is Britain’s industrial electricity costs, which are the highest across the rich world. “As energy capacity has been destroyed or mothballed, it has not been adequately replaced,” notes Kallum Pickering, chief economist at Peel Hunt. “And since electricity availability peaked in 2005, Britain’s trend rate of productivity has slowed sharply.” Simply put, the more cheap energy available, the more goods and services can be produced per hour at competitive prices.Some content could not load. Check your internet connection or browser settings.Second is demand. Weak wage growth is itself a function of poor productivity growth. In Britain, since 2000, average earnings growth has only just pipped the change in price level. But the costs of compulsory expenditures — including house prices, council tax, utilities, education and childcare — have grown significantly higher than both wages and inflation in that time. Public sector inefficiencies are central to this.Squeezed household budgets crimp domestic sales revenue and impact investment plans. According to quarterly CBI surveys, throughout the 2010s, on average close to 80 per cent of UK services companies cited demand as a constraint on business. Over 50 per cent of manufacturing firms said uncertainty about sales limited capital expenditure over the same period.More recently, the UK’s departure from the EU has restricted the country’s access to a large external market. Demand for British exports has weakened since 2020.Some content could not load. Check your internet connection or browser settings.Some content could not load. Check your internet connection or browser settings.This is just a snapshot of the factors driving Britain’s productivity woes. Many rightly allude to measurement issues too. Output in service sectors, intangible inputs and knowledge are not easy to capture. That said, enough can be explained by clear obstacles to growth. “There isn’t really a puzzle here,” says Allas.It is, indeed, surprising how little these productivity blockers have changed from when I began my career at the Bank of England in the early 2010s: poor investment, scaling problems, regional inequalities, skills shortages, et cetera.Britain is still talking about the same problems. Admittedly, substantive political bandwidth has been absorbed by Brexit and the related instability. The investment problem has also recently garnered policy attention: the UK introduced a full expensing tax allowance for capital investment in 2023; the current government is focusing on the labyrinthine planning system and pension fund capital.Yet after over a decade of growth plans, white papers, government inquiries and think-tank research, Britain has little to show for it in on-the-ground growth improvements.The solutions are known, but delivering on productivity policy is hard. Retrofitting old, existing infrastructure can be costlier and harder than starting from scratch. Finding the optimal level of regulation isn’t easy. Major tax reforms risk alienating one group while benefiting another. Building irks NIMBYs. Reforms, for instance to healthcare, education and training, can take years to bear fruit, meaning they struggle to gain traction. Initiatives may not survive the next government, limiting their effectiveness.There is glut of research on why the country’s productivity has fallen, but far less action on designing practical solutions to turn it around. The UK isn’t alone here. Britain has a puzzle. But it is one of policy, not productivity.Send your rebuttals and thoughts to [email protected] or on X @tejparikh90.Food for thoughtThe analogy that free speech does not protect “shouting fire in a crowded theatre” has shaped US law for over a century. But this game theoretic analysis reckons its economic underpinnings could be faulty. Recommended newsletters for youTrade Secrets — A must-read on the changing face of international trade and globalisation. Sign up hereUnhedged — Robert Armstrong dissects the most important market trends and discusses how Wall Street’s best minds respond to them. Sign up here More

Stay informed with free updatesSimply sign up to the More