Productivity growth sits at the heart of rising living standards. Over time, sustained increases in wages, incomes, and fiscal capacity depend on an economy’s ability to generate more value from the same or equivalent inputs. This is why the United Kingdom’s weak productivity performance since the financial crisis matters so much.1
Many of the forces shaping the global economy are exerting downward pressure on growth, such as ageing populations, energy transition costs, geopolitical uncertainty, supply chain reconfiguration, and postpandemic debt burden in the public sector. In the United Kingdom specifically, productivity growth has been persistently weak since the 2008 global financial crisis, contributing to weak growth in real wages, strained public finances, and a subdued medium-term economic outlook.2
While GDP growth may be modestly positive in the near term,3 weak underlying productivity growth continues to weigh on potential output and fiscal sustainability. This article argues that one important difference between the United Kingdom and its higher-productivity peers is that, despite comparatively strong leadership practices, the United Kingdom has lower quality operational-management systems. These include performance metrics, planning processes, and formal improvement methodologies. They are often enabled by IT systems but are not themselves IT systems. Such formal management systems allow organisations to translate strategic intent into disciplined daily execution.
The United Kingdom’s productivity problem: Structural, not cyclical
The United Kingdom has a persistent productivity problem, with growth stagnating since the 2008 financial crisis.4 Economically, productivity is separated into three broad drivers:
- Labour composition, which has improved over the past ten years. This captures changes in labour force quality, such as increases in educational attainment or skills. In the United Kingdom, improvements in labour composition have consistently contributed to productivity growth since about 2010.5
- Capital stock per worker, which has stagnated—leaving workers with fewer tools and infrastructure available to make them more productive. This measures the capital stock of an economy. On the ground, this manifests as better tools, equipment, intellectual property, software, and data, which allow workers to produce more per hour, as well as better infrastructure which allows the economy to be more efficient. Capital stock improvement has been subdued in the United Kingdom for the past two decades,6 reflecting weak investment that leaves the country’s comparatively more capable workers without equally improved equipment, systems, or infrastructure.
- Total factor productivity (TFP), which has fallen—meaning the economy is worse at converting inputs into useful outputs with the tools and infrastructure available. This measures how effectively labour and capital are combined to generate output.7 This “fundamental productivity” is heavily influenced by how organisations in an economy operate, and it has fallen in the United Kingdom over the past 15 years.8
In summary, the weak improvement in the United Kingdom’s productivity has largely resulted from improvements in workforce education and skill levels, with capital investment and TFP barely improved or declining (Exhibit 1).
TFP is driven by many factors, both inside and outside firms. At the macro level, institutional quality, the allocation of people and capital, the development and adoption of new ideas, and the spread of technology and know-how across the economy all play a major role. Within firms, leadership and management are broadly in charge of the decisions that drive TFP, including resource allocation, organisation and operating models, innovation, skills and talent, and even staff engagement. Leaders and managers are also responsible for designing and implementing firms’ day-to-day management practices—a key source of the United Kingdom’s productivity deficit.
The low comparative quality of the United Kingdom’s management practices, and its detrimental impact on productivity, has been widely studied and discussed by academics, think tanks, business leaders, and government. While not the only driver of TFP, we believe that management practices make up a substantive part of the United Kingdom’s productivity gap. Management practices are also an area in which individual organisations can take practical action to improve their productivity. Our new research suggests that formal management systems are less well-established in UK companies compared with Germany and the United States. Moreover, our experience shows that they can be implemented relatively quickly.
Stronger management systems drive productivity
A strong body of evidence shows that better management systems are tightly correlated with higher productivity across countries, industries, and firms. This relationship is neither new nor controversial: Research has consistently demonstrated that the way organisations are managed has a material impact on how they perform.
The World Management Survey (WMS)9 — launched in 2004 by McKinsey, the London School of Economics and Political Science’s Centre for Economic Performance, and Stanford University9 “International data on measuring management practices,” Centre for Economic Performance, January 2016. — found a clear link between management practices and organisational productivity, with the relationship holding across countries and industries. On the study’s five-point scale, a single-point improvement in the management practice score was found to have the same effect as a 25 percent expansion of the labour force or a 65 percent increase in invested capital.10 This is striking because it places management practices alongside traditional macroeconomic levers that usually dominate economy-level discussions of productivity. Management is not merely a “soft” factor; it operates at a scale large enough to matter for national economic outcomes.
The implication is straightforward: If the United Kingdom has a productivity problem, management systems deserve close attention. These systems significantly influence whether firms can efficiently transform the economy’s assets and raw materials into goods and services that the economy wants and needs. (For insight into how this may be affecting real-world outcomes, see sidebar “Why productivity growth is essential to UK infrastructure”).
Why productivity growth is essential to UK infrastructure
While the UK government has recently announced significant infrastructure investments— including its 2025 launch of a ten-year strategic plan to invest at least £725 billion—the country’s record in delivering projects on time and on budget is mixed. In fact, from 2015 to 2024, just 59 percent of planned spending on UK infrastructure projects materialised—a shortfall of £163 billion, even when accounting for unspent allocations that were rolled over into future years’ plans.1
At the same time, the pace of delivery projects undertaken has been hindered by continued productivity issues, exacerbating workforce supply shortages. From 2015 to 2024, construction economic productivity grew by 0.4 percent annually,2 driven mainly by increased labour productivity in building construction because labour productivity in civil engineering (including roads, highways, railways, bridges, tunnels, utilities, and water projects) was essentially flat. The United Kingdom’s construction workforce shrank to 2.1 million from 2.4 million in 2019 and has also remained flat.3
The workforce shortfall is exacerbated by the sluggish rate of construction productivity growth. If productivity in the sector remains static, its workforce will need to grow by more than one million people—or 40 percent—to meet the demands of planned increased spending. And with skills shortages and hard-to-fill vacancies relatively higher in construction,4 improving productivity is essential. Moreover, getting the strategic infrastructure built is necessary for unlocking productivity improvements in other sectors.
1 Emma Loxton, Michael Birshan, Tom Brinded, and Alexandra Gill, “Impatient for infrastructure? Four changes to improve UK project delivery,” McKinsey, March 12, 2026. 10 “Management practice & productivity: Why they matter,” McKinsey and the Centre for Economic Performance, July 2007. 2 “Labour productivity time series,” Office for National Statistics, February 17, 2026. 3 “EMP13: Employment by industry,” Office for National Statistics, August 12, 2025. 4 Suban Abdulla, “Britain pledges 600 million pounds to tackle construction skills shortages,” Reuters, March 22, 2025.
Diagnosing the United Kingdom’s problem: Weak management systems
In November 2025, McKinsey conducted a global survey on operational leadership and management systems across approximately 1,000 respondents in 13 countries (for more, see sidebar “About our research”). While the sample size is insufficient to support robust causal attribution, the results are directionally consistent with long-standing findings from the WMS and our lived experience at McKinsey helping operational companies in the United Kingdom and abroad. Our latest research provides a more granular view of how management practices differ across countries and how this may be influencing productivity.
About our research
The World Management Survey, introduced more than 20 years ago, offered a new methodology to survey management practices across more than 4,000 firms across Asia, Europe, and the United States.1 The latest McKinsey operational-excellence survey was launched in November 2025 and gathered about 1,000 responses across 13 countries. The survey spanned nine sectors, with roughly half of respondents drawn from manufacturing and with a broad range of organisational sizes represented—from midsize firms with about 100 employees to large enterprises with more than 50,000 employees. The survey asked specific questions about operational-management practices within businesses to clearly distinguish between the hard management systems an organisation has in place and leaders’ efforts to focus and advance the organisation. For example, questions included “To what extent do you agree that everyone in my company, from the CEO down, has a clear understanding of our performance metrics?” and “In the average workweek, approximately what percentage of time do leaders spend developing people and improving the business rather than running day-to-day operations?” One analyst described this separation as seeking to determine “how good the bicycle is and how good the rider is.”
Compared with the United States and Germany, the United Kingdom has weaker management systems. When comparing the United Kingdom with these peers across all dimensions of operational management—daily metrics and steering, planning, and improvement—Germany scores the highest, followed by the United States and then the United Kingdom (Exhibit 2). This directly mirrors labour productivity measured by GDP per hour worked: The United Kingdom (GDP of $78 per hour worked) lags both the United States ($97) and Germany ($94).
Specifically, organisations in the United Kingdom score lowest on key operational-management practices (Exhibit 3):
- daily metrics and steering, indicating weaker use of real-time data and short- cycle performance measures to direct frontline activity
- planning practices, likely leading to inefficient allocation of people, equipment, and infrastructure to tasks, as well as an inability to match capabilities and capacity to demand, meaning organisations sometimes have too many resources and not enough tasks and other times have too many tasks and not enough resources
- improvement, likely indicating that UK organisations do not embed improvement into regular activity, so problems are not solved and recur regularly
How UK organisations manage by tasks, not systems
The United Kingdom has slightly superior leadership practices compared with its peers. Namely, managers in the United Kingdom are stronger in aligning on and setting clear strategic targets; adopting strong, well-defined strategic KPIs that are visible across the organisation; and doing less firefighting (Exhibit 4). Yet productivity in the United Kingdom is consistently lower.
Based on this data and our experience, we believe the UK has a structural problem with how organisations manage their operations. The issue is that in the absence of a management system, leaders will direct an organisation by tasks, giving instruction rather than monitoring a system, which matches people, equipment, and assets to needs. This means operational performance depends heavily on leadership attention rather than on management systems that deliver the tasks autonomously. Organisations with management systems in place allow operational leaders free to "manage by exception" (the major issues that people cannot solve by themselves) and drive the organisation to improve. Taken together, the survey reinforces a simple but important point: While the United Kingdom’s productivity underperformance is visible in national economic statistics, a major contributing factor lies with the day-to-day systems running organisations. This hypothesis is reinforced by real-world experience. For example, a global specialty chemicals company had three sites, United Kingdom, United States, and Germany. It found that its German and US sites achieved high productivity through either advanced technology or disciplined management systems, while its UK site lagged due to weak operational-management practices and limited use of existing systems to drive performance (see sidebar, “Case study: A tale of three sites”). What makes this example valuable is that it shows the issue is not abstract: different management systems inside the same company can generate materially different productivity outcomes.
Case study: A tale of three sites
Differences in approaches to productivity often exist within the same organisation. Consider a global specialty-chemicals company whose German and US sites had sophisticated management systems to drive performance, while its UK site did not.
Germany: Excellence through technology
The German refinery had relatively high per-person labour and overhead costs but exemplary plant management and technical design. Consistent operational focus had led to the engineering function technically improving the plant, including by installing glass-lined distillation columns that allowed continuous running for up to three years, minimising downtime and maximising revenue. The site also had dedicated maintenance teams, allocated to each production line. While expensive, these teams ensured that the site could return to production as soon as possible if there was a breakdown. Fundamental management practices were consistent and disciplined across the site, with equipment uptime measured on flat-screen monitors in the control rooms and management offices in near-real time. While the site was arguably over- staffed, it had a robust management system that helped drive productivity.
United States: Leaders pushing to establish management systems
In North America, strong management practices and the leadership team’s sheer “force of will” compensated for the plant’s lack of technical sophistication. While the plant did not use glass- lined distillation columns because of concerns they may be damaged by maintenance technicians during shutdowns, leaders did apply disciplined operational-management practices. Overheads were lean, with management practices developing organically over years to minimise plant downtime and maximise output. For example, a robust restart procedure minimised downtime when a production unit broke down, with the process informally called an “air crash procedure.” This indicated the urgency the organisation felt was required, with management systems driving behaviour and culture.
United Kingdom: Compliance and a lack of systematic leadership
Design of the UK plant was suboptimal: It shut down annually for maintenance, did not have enough maintenance technicians to dedicate teams to each production unit (unlike the German site), and lacked robust management practices to restart production quickly after a stoppage (unlike the US site). Management systems to improve uptime had been implemented by the global parent company in the form of a production delay report tool and although the downtime data was recorded, it was not then used by site leaders to drive improvement. For instance, the system required a reason be provided for any production delay. Even after an operator wrote “plant delayed because I had to go and pick up my food delivery from the gate,” it was not seen by site leaders because the system was not used to steer operations, so nothing was done to prevent it from recurring, and the individual faced no consequences.
The United Kingdom’s management system deficiency
Our survey data indicates that the United Kingdom has inferior management systems and procedures. For example, UK organisation will, on average, find it harder to plan, track, review, and improve its operations. However, the same data shows that organisations measure performance rigorously at the top level, as in output KPIs such as units produced or shipped.
This indicates that while organisations in the United Kingdom can, on average, clearly see what performance is (and what has not been achieved), the absence of management systems means they cannot see why. The absence of management systems means processes are likely undefined and unmeasured: KPIs turn red, people are disappointed, and the organisation moves on without truly understanding the operational causes.
Organisations with strong operational-management systems can see the parts of the operation needing attention, allowing improvements that underscore the management system's value and encourage leaders to develop and use the management systems themselves. Without such systems, UK organisations may be in a “doom loop”: Weak management systems reduce visibility, which limits leadership intervention. This, in turn, leads to lower long-term performance, which reduces expectations and ultimately reinforces lower productivity in the United Kingdom relative to its peers. In short, UK organisations normalize underperformance over time because they lack the insight to identify root causes and improve performance; as a result, low performance becomes the norm.
Bringing the problem to life: Driving without a dashboard
Imagine an organisation as a car, its leader as the driver, and its objective as reaching the destination in the planned journey time. In the United Kingdom, leaders set the destination clearly (“We will drive from London to Birmingham in three hours”) and communicate it well across the organisation. The objectives are unambiguous, and on this dimension—setting clear destinations and communicating them well—UK leaders outperform their counterparts in the United States and Germany.
Yet the car has no dashboard. The driver cannot see the speed, fuel level, engine temperature, or warning lights. As the journey progresses, the car arrives late. Everyone can see this—its top-line output KPIs are turning red. But without a dashboard, the driver cannot diagnose why. Is the engine underperforming? Is fuel efficiency poor? Is something about to fail? The organisation sees low performance but cannot identify the operational causes behind it.
Having arrived late, the driver’s options are limited. They can tell the team to try harder next time—a vague direction that solves nothing—or they can buy an entirely new car, which is the organisational equivalent of a major restructuring or a large-scale capital investment programme. That will likely be costly and ultimately ineffective—an expensive overreaction to a problem that was never properly understood. Neither option addresses the root cause of the problem, because the root cause was never visible.
What typically happens next is the most damaging: The journey time gets revised upward. The driver is likely being held to account for that metric by their own leadership and, in the absence of any system to monitor and improve the car, the planned journey time gets revised up to match actual performance, with underperformance becoming the new normal.
In the United States and Germany, leaders have both the destination and the dashboard. They can see speed, fuel consumption, and engine temperature in real time, meaning when performance slips, they know whether to change speed, refuel, or pull over and investigate. Coaching becomes targeted. Problem-solving addresses real causes. Journeys consistently arrive closer to plan because the driver can see what is holding the car back and act on it. And because the dashboard demonstrably helps, leaders invest in improving it further—adding aftermarket gauges and sensors and building in more-granular visibility into performance. The system justifies itself: Better information drives better decisions, better decisions improve performance, and better performance reinforces the case for the system. The journey gets faster over time.
Improving productivity through management systems
Improving UK productivity requires improving the productivity of individual firms. The good news is that it’s possible to improve operational-management systems quickly—if organisations prioritise it. Improving weak firm-level operating systems is one of the most practical levers available.
Unlike structural factors such as labour quality or capital stock, improving management systems does not require fundamental changes to the economy. It requires organisations to adopt disciplined management practices that improve planning and capacity management, build transparency into performance, and embed continuous improvement into daily work.
This is not about incremental optimisation at the margins. In many cases, the absence of high- quality management systems means there is substantial untapped operational improvement; double- and triple-digit percentage improvement is not unusual. For organisations willing to prioritise these changes, the impact can be both fast and transformational. Although UK organisations have been in an operational-management doom loop for decades—and operations have become more specialised and technologically sophisticated—rapidly deploying management systems is still relatively practical and can quickly and dramatically improve productivity.
Three actions to unlock UK productivity
Three examples illustrate how improvements in metrics and steering, planning, and embedded improvement disciplines can quickly translate into better productivity outcomes.
Daily metrics and steering—measuring what you can directly influence.
Clear, consistent metrics are foundational to effective management, particularly in complex operations where coordination spans engineering, process control, logistics, and frontline manufacturing. Without structured performance visibility, leadership attention defaults to anecdotes and informal updates, and discussions drift towards what is loud rather than what is material. In such environments, leaders are engaged, but without accurate and useful operational metrics, they lack the clarity needed to prioritise and steer effectively.
A European industrial company confronted this challenge directly. Its leadership team relied on ad hoc meetings and written reports, with limited understanding of plant-level performance. The organisation introduced clear, cascading metrics that linked day-to-day activities directly to site performance. This created transparency, aligned frontline activity with strategic intent, and focused leadership attention on the most consequential issues. The result was a 7 percent increase in productivity. “It stopped us having pointless discussions,” the site manager said. “We used to get sucked into tiny conversations about things that don’t matter, but now, we spend most of our time talking about the real problems the site faces.”
Effective planning—understanding true capacity and matching it to the most important operational activities.
In complex operations, planning is arguably the most important and most overlooked productivity lever. Without detailed planning, problems are baked into activities before they even start, and that leads to low expectations for output (or even chaos as baked-in problems halt people’s activity). As products and services in developed economies become more sophisticated, operations to produce them become more complex. Planning becomes even more important. Operations are not limited to the “hard operations” environments of manufacturing or infrastructure; the service sectors of the UK also benefit from improving operational-management practices.
A UK media company faced this problem. It operated multiple media outlets in TV, radio, and online platforms. In its production of a TV show, planning was critical, and while good, it focused only on the “product”—the show itself. The company did not consider the resources (people, equipment, and locations) in its plan. As a result, people spent significant time waiting, equipment was over-hired, and locations were underutilised. This drove up costs. But after successfully implementing more sophisticated planning systems, the resources required to produce broadly the same level of TV content could be reduced by 10 to 20 percent, and the organisation was able to implement this in a matter of weeks.
Embedded improvement disciplines—identifying and fixing the many small problems that cost time and money.
Regular, focused improvement that mobilises the workforce can have a disproportionate impact on productivity, particularly in complex, high-product variation environments. In operations where tasks differ day to day and require multiple tools, setups, and processes, the likelihood of problems inhibiting production is higher. Missing tools, unavailable parts, sequencing conflicts, equipment reliability issues, or layout inefficiencies are not exceptional events; they are recurring frictions that, if unaddressed, accumulate and become normalised. In such contexts, productivity does not hinge on one major breakthrough but on steadily removing many small obstacles. This makes constant, structured micro-improvement essential.
For example, at a global aerospace manufacturing site, teams produced small batches of aircraft components. Managers initially believed the work was too bespoke to measure consistently, and productivity was not formally tracked. But the organisation introduced a simple, shared KPI— operator hours per part versus planned hours per part. This was not meant to manage individuals but rather make team performance visible to the team itself. Each day, the 16-person team reviewed results, identified problems, and agreed on specific actions to fix them, supported by time and training to act.
Making performance transparent surfaced hundreds of small but meaningful problems that could be resolved quickly. The most visible involved specialised drills used only to bore holes on the leading edge of carbon-fibre aircraft wings. The site had three of these drills, which had to be individually certified by the Federal Aviation Authority. After the second week of implementing the KPIs, it became clear that of the drills one was lost, another broken, and the third unreliable. The team fixed the two drills at the company’s on-site tool repair workshop which, in addition to other actions, dramatically improved morale and saw productivity jump 23 percent within six weeks.
These three examples show that management systems are not abstract governance tools. When organisations strengthen daily metrics, planning discipline, and continuous improvement routines, productivity can improve materially. And they can be put in place quickly: With the right tailored implementation approach, these practices can be implemented in weeks, with their performance impact visible to senior leaders within months. The art is in tailoring these systems for the specific situation. Blind “cut and paste” implementation will make matters worse. For United Kingdom organisations that have been in a management doom loop for decades, the escape can be achieved in a matter of weeks.
The country’s productivity challenge does not stem from a lack of willingness among organisations to improve. The evidence points instead to a more specific problem: too many organisations have not built the operational-management systems required to turn strategic intent into consistent execution. Where those systems are weak, leaders can set direction but cannot see performance clearly enough to improve it. Where those systems are strong, organisations can surface problems early, coach effectively, solve the right issues, and sustain higher productivity over time. To improve UK productivity, the country needs more-productive firms. To build more-productive firms, it needs stronger operational-management systems—systems that make performance visible, problems actionable, and improvement routine.
Anna Kortis, Laurence McHauser, and Matt Jochim are partners in McKinsey’s London office, where Tera Allas is a senior adviser. The authors wish to thank Andrew Goodman, Michael Birshan, Holly Driver, Harshita Ramakrishnan, Olivier Bildstein, Camille Fayet, and Caoilainn Carey for their contributions to this article.
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