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United Kingdom
Vulnerable social groups have been particularly affected by the pandemic and poverty is set to increase as
jobs are lost and self-employed see incomes dwindle, accentuating regional differences. The COVID-19
crisis has emphasized the need to re-train and up-skill the population, secure access to affordable housing
by reducing bottlenecks to supply and to revive investment.

Performance prior to the COVID-19 crisis

Economy Gap to the upper half of OECD countries Employment rate for 15-64 year olds
% %
GDP per capita is 16% lower than 0 80
OECD best performers. Productivity per
-5 hour worked 75
Productivity is 10% lower than United Kingdom
GDP per capita
OECD best performers. -10 70
OECD average
-15 65
Employment rate is high
and was increasing -20 60
before the 2020 crisis. 2000 2019 2010 2019

Inequality Gini coefficient of income inequality

Inequality is higher than in United Kingdom, 36.6

most advanced economies. Low inequality, 23.6 Very high inequality, 62.0

The poorest 20% of households Advanced economies Emerging economies

earn 6.7% of total income. (median), 30.3 (median), 45.9

2018 or latest year available

Environment Tonnes of CO2 equivalent

Greenhouse gas emissions per capita
20

Half of the population 15 OECD average

is exposed to harmful levels
of air pollution. 10
United Kingdom
5
GHG emissions have
decreased in recent years. 0
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Economy: Percentage gap with respect to the population-weighted average of the highest 18 OECD countries in terms of GDP per capita (in
constant 2015 PPPs).
Inequality: The Gini coefficient for disposable income measures the extent to which the distribution of disposable income among households
deviates from perfect equal distribution. A value of zero represents perfect equality and a value of 100 extreme inequality.
Environment: Greenhouse gas (GHG) emissions include emissions or removals from land-use, land-use change and forestry (LULUCF). A high
exposure to air pollution refers to above 10 μg/m3 of PM2.5.
Source: Economy: OECD, National Accounts, Productivity and Labour Force Statistics Databases; Inequality: OECD, Income Distribution
Database and World Bank, World Development Indicators Database; Environment: OECD, Environment Database and United Nations
Framework Convention on Climate Change (UNFCCC) Database.

StatLink 2 https://stat.link/i9usf5

ECONOMIC POLICY REFORMS 2021: GOING FOR GROWTH © OECD 2021

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Life-long learning and investment to ensure broad growth benefits

Given the pre-pandemic large skills gaps of the population and inequality concerns, funding for lifelong
learning should be increased further. The United Kingdom has one of the highest shares of under-qualified
workers among OECD countries while public and corporate spending on adult learning has declined,
alongside participation in lifelong training. Support for job search, skills and apprenticeships, set out in July
2020, should be increased further, giving priority access to low-wage-low-skilled workers and good quality
ICT trainings. Enhancing the overall access to Jobcentre Plus, the public employment service, and raising
the quality and effectiveness of training programmes, would ease the impact of structural changes
triggered by COVID and digitalisation (Panel A).
After decades of public under-investment, there is a considerable need to invest in infrastructure,
including digital. Large investment is also needed to move toward a low-carbon economy and to tackle
the long-standing challenge of narrowing regional differences, likely exacerbated by the COVID-19 crisis.
The pandemic slowed private investment further, which has been weak since the 2016 referendum to leave
the European Union (EU). Investment can be revived by maintaining low barriers to trade and investment
with the EU and other trading partners. Easing land use regulations while balancing resource allocation,
environmental and social concerns can also spur more investment in housing, improving housing
affordability and competition in construction. The Government’s 2020 White paper on the issue is
welcome and policy measures should follow. These should be complemented by making the temporary
cut in the stamp duty permanent and reforming the regressive Council tax.

Vulnerabilities and areas for reform

A. Public expenditure on active labour B. The implicit tax on returning to work
market policies is low for the second earner is very high
Per unemployed, 2018¹ Percentage of gross earnings in new job,²
As a percentage of GDP per capita 2020 or latest year available
20 80

15 60

10 40

5 20

0 0
UNITED KINGDOM Advanced economies UNITED KINGDOM Advanced economies

1. For the United Kingdom, the latest year available is 2011.

2. Second earner taking up employment at 67% of average wage with the first earner at the average wage.
Source: Panel A: OECD, Public expenditure and participant stocks on LMP and Economic Outlook Databases; Panel B: OECD, Tax-Benefit
Models.

StatLink 2 https://stat.link/gi4f8k

High childcare costs continue to pose a hurdle to working mothers, who also took more responsibility for
childcare during the lockdown (Panel B). Increasing support for full-time good-quality childcare would
allow them to return to work. To leverage private sector innovation in emerging sectors and potentially
“disruptive” technologies, ensure a balance between direct R&D support and tax incentives.
Furthermore, channel the support also to smaller companies.

ECONOMIC POLICY REFORMS 2021: GOING FOR GROWTH © OECD 2021

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United Kingdom: Summary of Going for Growth priorities and recommendations

2019-2020 Reforms Recommendations

Education and skills: Boost funding for lifelong learning
 From August 2020, the Government has been extending  Continue to boost funding for lifelong learning, prioritising
the statutory entitlements of the Adult Education Budget to improved access for low wage, low-skilled workers.
fully fund all adults to take basic digital skills courses.  Improve access to, quality and effectiveness of training
 The Youth Obligation Support Programme helps young programmes offered by Jobcentre Plus, the public
people develop the skills and experience they need to get into employment service.
sustainable employment.  Provide good quality ICT training to low-skilled workers.
 Funding to skills and apprenticeships was increased by
GBP 1.6 billion in the 2020 Plan for Jobs.
Infrastructure: Increase public investment, prioritising digital infrastructure and deprived regions
 The Government allocated GBP 88 billion for roads,  A planned sustained increase in public investment,
railways, communications, schools, hospitals and power prioritising digital infrastructure and deprived regions, could
networks across the country in the 2020 Budget and bring sizeable long-term output gains, and would help to
accelerated some public investment plans in response to the reduce inequalities.
COVID-19 crisis.  Sound governance will be key to reap the full gains from
increased public investments.
 Keeping low barriers to trade and investment with the
European Union and others, particularly securing market
access for service sectors, would be beneficial for private
investments going forward.
Housing: Improve housing supply and competition in construction
No actions taken  Ease land use regulations to improve housing supply and
competition in construction, balancing resource allocation,
environmental and social concerns.
 Move to a flat-rate Council tax, while permanently reducing
the stamp duty.
Labour market: Increase support for full-time good-quality childcare
No actions taken  Increase support for full-time good-quality childcare,
notably by limiting costs relative to disposable income to
facilitate full-time work and schooling for second earners.
R&D and digitalisation: Ensure a balance between direct R&D support and tax incentives
 Public spending on R&D subsidies has increased fast since  Ensure a balance between direct R&D support and tax
the mid-2000s and is high in OECD comparison. incentives to leverage private sector innovation in emerging
sectors and potentially “disruptive” technologies.
 Put an emphasis on channeling support to smaller
companies, for example with support facilities targeted
directly at SMEs.

Recent progress on structural reforms

The United Kingdom left the European Union 31 January 2020 and left the single market 31 December
2020, preparations for the exit have held up political and administrative capacity and reforms since the
2016 referendum. Lately, initiatives linked to the COVID-19 response and the Government’s plans to level
up regions outside of the prosperous South-East England started addressing some long-term challenges,
notably by boosting funding to public investment and skills and by outlining an overhaul of land-use
regulations. However promising, these efforts need sustained attention and financing to address the
underlying challenges.

ECONOMIC POLICY REFORMS 2021: GOING FOR GROWTH © OECD 2021