The danger is not making a real difference to productivity when the country needs it the most, writes Anna Valero. Budget 2017 began with a bleak assessment of the UK’s growth prospects. For those of us following the economic trends and policy debate, there was little surprise at the downgrade of future productivity growth by the Office for Budget Responsibility. Productivity has flat-lined since the financial crisis as successive budgets have failed to have much discernible effect on the key issues of underinvestment in innovation, skills and infrastructure. This has long been a concern because without productivity growth, living standards will continue to suffer and public services will continue to be squeezed. In addition, there is the uncertainty surrounding Brexit, which has already had a damaging impact on living standards, and which poses a number of economic risks depending on the form it ultimately takes. Some of the costs of Brexit are short-term – for example, the costs of formulating new customs or regulatory arrangements (for which the Chancellor has put aside a further £3 billion), or the losses of trade that would be associated with increasing trade barriers. But from a productivity perspective, we must be mindful of the longer-term impacts of reduced trade, inward investment and access to international talent on. Further reading: ‘   Family policies, the allocation of talent, productivity and growth   ’, Oriana Bandiera and Anna Valero, LSE mimeo.

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