The UK’s productivity problem is a persistent headache. Economists at the Bank of England and elsewhere have been pointing to one recurring problem for almost a decade now: a leadership and management gap. Yet while the problem is particularly acute in the UK, it’s an increasingly common phenomenon worldwide.
So what is the root cause of poor productivity, and how much of it is uniquely British? While it’s tempting to pin it on some of the usual suspects, there’s a growing sense that the direction of leadership has left workers disengaged and underutilised as much as global events. Solving it may take some soul-searching—and a consideration of what good leadership and management mean in the modern age.
Hub and spoke
While many people have tried to link leadership to falling productivity, perhaps the definitive example is a 2018 speech by then Bank of England economist Mark Haldane. Titled ‘The UK’s Productivity Problem: Hub No Spokes’, the speech posits that the productivity crisis is fundamentally a “hub-and-spoke” problem. The ‘hub and spoke’ metaphor is often employed in the context of air travel: the ‘spokes’ connect domestic passengers to hubs, where they can then fly further afield. In an economic context, city-based ‘hub’ firms are highly productive, but the ‘spokes’—the smaller economic forces around the country—lag behind.
In essence, what Haldane points to is not just a skills gap in leadership and management, but a more systemic issue. The benefits of having highly successful businesses in the UK are not being passed down to smaller businesses, where the lowest levels of productivity are far below comparable European economies. The trappings of success—in infrastructure, innovation, technology, expertise—are only sustaining the organisations at the top of the rung, and not trickling down to the others.
Many have pinned this on an increasingly disengaged workforce. A 2023 Gallup report found that a staggeringly small 15% of UK workers are engaged at work, highlighting a broad absence of motivation and purpose. This does speak to certain social changes, such as a trend towards ‘presenteeism’, and not going above and beyond if your heart isn’t in it. But the problem seems to run much deeper than one generational shift can explain.
On a mission
With unemployment currently low, and younger people more likely to change jobs, expectations have changed around what a job should entail. One aspect is a clear vision, both in the business’ mission statement and ethics, and in personal progression. It’s one thing to articulate a compelling vision, but it has to be actionable, and align with people’s desire to contribute something beyond the confines of the room they work in.
This lack of connection that can occur with employees owes something to poor communication. There’s often a feeling between more senior managers and junior employees that a generational gap exists in communication skills, which makes it hard to achieve buy-in. This may be true in part, but there’s also been a change in the terms of engagement. Modern leadership needs to be more of a two-way street than ever before: providing as much value to employees as they deliver to the business.
It\s always been the case that leaders who fail to communicate effectively create confusion and frustration. Yet too many people make excuses for why clear, constructive communication with employees doesn’t happen. Often, it means having an openness to structural changes and self-improvement that can be difficult to reckon with. A lack of productivity can be easily blamed on the employees, when they feel constrained by the system they’re working in, and a ceiling on their progression.
Developing talent and taking risks
This should be solved by open communication, consultation, and reasonable accommodations that better energise and motivate employees. Yet too often, the response is to double-down, micromanaging employees to ensure that they are using their time effectively. This often has the opposite effect, and not just because of a lack of trust or autonomy. If micromanagement is necessary, it implies a lack of confidence in the leader’s own vision, and what should be motivating employees.
Evidence shows that leaders who empower their teams by providing autonomy and ownership see better results. A 2022 study by McKinsey found that companies with a strong sense of female empowerment, for instance, see a 21% increase in profitability. This comes not from a lack of oversight, but investing in employee development and upskilling, and putting trust in employees to deliver. Again, leaders should have the courage of their convictions: giving employees the platform for self-improvement, and giving them a platform to showcase their skills.
What’s important is that this culture of continuous improvement applies as much to leaders and managers as the people they manage. Leaders who fail to embrace changes and learn new techniques can become risk averse, doing things ‘the way they’ve always done them’. This limits productivity in itself, but it also accentuates the risk of employee disengagement, as the gap in communication and actions grows wider over time.
Investing in leadership and management
The good news is that these leadership and management deficiencies can be addressed. The first and most impactful step can be direct action, in the form of employee consultation and building bridges across generations. More broadly, however, it’s simply a commitment to change. This isn’t straightforward, but owning the fact that you have room to improve and to learn as much as you teach is pivotal to effective leadership.
Investing in leadership development programmes can equip managers with the skills they need to motivate, inspire, and guide their teams effectively. This is particularly important where leaders are recruited internally, and skills on managing established relationships need to be nurtured. Among younger people, soft skills like communication, collaboration, and emotional intelligence can also be areas to focus on and hone.
Mentorship and coaching programs can provide also valuable guidance and support to aspiring leaders, with experienced leaders paired with employees to accelerate their development, and facilitate learning in both directions. Beyond all else, though, leaders should create a culture where feedback is encouraged and seen as a tool for growth. This requires establishing clear communication channels and training managers, so that feedback is both constructive and effectively delivered.
The UK’s productivity puzzle requires a multi-faceted solution. While skills and technology matter, strong leadership is the missing piece. By investing in leadership development and fostering a culture that empowers and inspires, UK businesses can unlock their full potential and drive long-term productivity growth. This approach can build a more engaged workforce, foster innovation—and create a future where the UK economy thrives.
