UK Productivity Crisis Demands Focus on Tech Diffusion, Not Just Innovation
The United Kingdom’s economic future hinges on a nationwide effort to distribute and adopt new technologies, rather than solely focusing on groundbreaking inventions, according to a new analysis. While the government rightly prioritizes innovation – particularly in areas like artificial intelligence – a critical gap remains in supporting businesses to implement productivity-boosting technologies, potentially creating a widening economic divide.
The analysis, penned by Mathew Sim, senior economic advisor at the Tony Blair Institute for Global Change, and Jose Mejia, economic advisor at the same institute, draws a parallel to the British Industrial Revolution. “A key but often overlooked feature of Britain’s Industrial Revolution is the web of institutions, incentives and skills that turned invention into innovation,” they write. “For every James Watt refining the steam engine, there was a Matthew Boulton with the capital, networks and entrepreneurial drive to turn new ideas into productive reality.”
The current focus on “frontier innovation” – the development of cutting-edge technologies – is laudable, but insufficient. The UK ranks sixth globally in the Global Innovation Index, yet a disappointing 37th in “knowledge absorption,” signaling a significant challenge in translating ideas into widespread practical application. This disparity highlights a crucial point: the UK’s productivity challenge is as much about adoption and diffusion as it is about invention.
Other nations have successfully addressed this issue. Singapore’s SMEs Go Digital programme and Germany’s Mittelstand-Digital actively assist firms in adopting new technologies. In contrast, Britain has halved its investment in the foundational elements of diffusion – workforce training, management quality, and organizational development – since the financial crisis.
The High Cost of Adoption
Adopting new technology isn’t simple. Businesses face hurdles in identifying the right tools, integrating them effectively, and often experience short-term revenue dips before realizing a return on investment. A robust diffusion system should alleviate these burdens, reducing both the cost and complexity of adoption. However, British businesses currently navigate a “fragmented and poorly targeted patchwork of support,” lacking the scalability needed to reach a broad range of companies. This results in a growing two-tiered economy, with a handful of leading firms pulling ahead while a large segment struggles to keep pace.
A Modernized Tech-Diffusion Ecosystem
To bridge this gap, the UK must modernize its tech-diffusion ecosystem, providing comprehensive support to businesses of all sizes in identifying, acquiring, and integrating technology. This requires leveraging existing resources, particularly universities, and building a digital infrastructure capable of scaling support nationwide.
Universities should serve as the “physical backbone” of this infrastructure. Already anchored in local economies and possessing extensive expertise and connections, a national network of University Technology Adoption Centres could offer hands-on advice, training, and peer learning opportunities, reducing costs for smaller companies. Both the Russell Group and Universities UK have expressed support for a stronger role in facilitating business adoption of new technologies.
Alongside this, the UK needs a digital “CTO-as-a-Service” system, offering a single point of access for firms seeking technology adoption assistance. Modern technology allows for personalized support at the firm level while maintaining scalability at a systemic level. The key components of this system would include a digital CTO platform to consolidate support resources, a business digital ID to facilitate targeted advice and outreach, and an AI assistant to expand the ecosystem’s capacity.
Significant Economic Gains
The potential benefits of upgrading the UK’s technology-diffusion system are substantial. Analysis by the Tony Blair Institute suggests it could add over £6 billion to the UK’s GDP within the current Parliament – comparable to the impact of major government reforms like planning. This reform is projected to largely pay for itself, with increased growth generating higher tax revenues.
Beyond the economic figures, a nationwide diffusion system offers a path toward more balanced and inclusive prosperity by extending the reach of new technologies to firms and regions that have been historically underserved. It would transform the government’s growth mission into a truly national project.
“Britain’s future prosperity depends not only on what we invent, but on how widely we share it,” Sim and Mejia conclude.
