Britain’s growth strategy needs training boost, expert says

Britain will struggle to boost economic growth without investment in training and skills but this sector of the economy is getting little help from the government, business expert Nigel Driffield told The Sentinel.

   Britain’s left-of-centre Labour government, elected with a strong majority in July 2024, is trying to lift people out of poverty and provide better public services without sharp rises in the tax burden. It is looking to faster growth to close that gap, but that strategy has failed to bear fruit so far. Gross domestic product grew at only 0.1 percent in the third quarter of 2025, down from growth of 0.3 percent in the previous quarter.

    Concerns about the cost of living, coupled with worries about immigration, have given the right-wing populist Reform UK party a strong lead in opinion polls.

   Manufacturing in Europe has been lagging the United States and China, fueling a rise in populism, as The Sentinel has previously reported. Productivity is particularly slow in Britain, according to Driffield, professor of international business at Warwick Business School. 

    “We have a major productivity problem in this country, much more than an employment problem. We have a lack of investment in capital, and lack of investment in skills.”

     Britain issued its closely-watched annual budget statement in late November, delivered by finance minister Rachel Reeves. The government has provided an extra 1.5 billion pounds to help employers train young people. However, such money is often diverted for use for higher-skilled workers, Driffield said.

    “Businesses send people on an MBA, that doesn’t necessarily address the lower skills problem.”

    For university students from poorer families, the government said it would reintroduce small student grants. However, its plans to charge each university a levy of £925 per student for most international students are a counter-productive measure, according to Driffield.

     “Can you imagine a situation where the government says, ‘we are going to put an export tax on Jaguar cars’? Name another sector where it would do that.”

    Driffield said the latest budget was mainly about lifting people out of poverty. The government finally removed an unpopular cap on child benefit for families with more than two children, introduced by the previous Conservative government.

   The minimum wage was also raised in the budget by 4.1 percent to £12.71 per hour. However, campaigners argue that the minimum wage is still not enough to live on.

    “A very high proportion of people on benefits are also in full-time work, because they are on very low earnings,” said Driffield. “We are effectively subsidising low-wage employers. That’s why I advocate for investment in skills. If people working full-time on the minimum wage are still eligible to claim benefits, that tells you there’s something wrong.”

     Income tax rates did not rise in the budget, in line with a promise by Labour in its manifesto. But the government announced a further freeze to the income thresholds above which people have to pay higher tax rates, effectively meaning higher taxes for many in the future.

      The extra three-year freeze will cost the typical worker £220 a year, according to a post-budget report from the think tank Resolution Foundation, which focuses on living standards. Most workers would be worse off than if Reeves had raised income tax by 1p instead, the Resolution Foundation added. 

    The High Pay Centre, a think tank for fairer pay, was also critical of the tax strategy.

    “Given the scale of inequality in the UK, the government would have been better served by increasing taxes on a banking sector turning in its most profitable results in decades, or via a wealth tax on the very wealthiest in our society,” High Pay Centre spokesperson Paddy Goffey said.

    At the same time, in addition to the latest minimum wage increases, businesses are still smarting from the government’s decision in the previous budget to require employers to make national insurance – social security – contributions for lower-paid workers.

     “It wouldn’t surprise me if we start to see some impact on employment, given the weakening labour market situation,” said John Forth, professor of human resource management at City St George’s, University of London.

   Driffield said the extra wage costs would be hard for employers in some sectors to bear, for instance in the hospitality industry. 

    However, higher employment costs for more skilled workers, such as lab technicians, could encourage more investment in training by employers, Driffield added.

    Britain is behind other countries such as France in productivity and growth, due to low levels of public and private investment, according to the British government’s own figures. Britain’s GDP-per-hour-worked has grown by 0.6 percent since 2010, compared with around 1.0 percent in France, according to a report from Britain’s prime minister’s office in 2025.

      “One of the big differences between the UK and France is that the French labour market is great if you are an insider,” said Driffield. 

“Business will invest in you, but getting in is quite hard. If you are a North African migrant living in one of those banlieues (outer suburbs of Paris), you are frozen out. In Britain, you have a labour market that is very good at getting people into jobs, but not very good in training.”