Bridging the Productivity Gap in the East

The East of England - home to world-class research institutions, thriving innovation clusters, and high-value industries - has long played a pivotal role in the UK economy. But how is the region performing when it comes to the fundamental driver of prosperity: productivity?

The latest TPI Productivity Scorecard for 2025 offers a rigorous evaluation of regional performance by comparing each region and nation against the national median across a wide set of metrics (lab.productivity.ac.uk).

Overall, the East of England performs at 95.4% of the UK median, positioning it as the 4th highest-ranked among all English regions and nations in the UK. This places the region just slightly below the national standard - solidly mid-table but with clear room for improvement.

The region fares well in areas such as skills, innovation activity, and access to finance, but challenges remain in investment levels, wage growth, and the rate of business start-ups. With national policymakers increasingly focused on regional growth, these insights could shape future strategies and funding priorities.

Productivity in Context: Measuring the Gap

Productivity, measured as output per hour worked, remains below the UK average in most regions—including the East. However, using the UK median as a benchmark rather than the average (which is skewed by London), the Scorecard shows that the East performs relatively well across several key indicators.

Strengths in Innovation and Skills

One of the East’s greatest strengths lies in the skills of its workforce. The region has a lower-than-average share of people with no or low qualifications, placing it in the top group alongside London, the South East, and Scotland. This suggests a relatively well-qualified labour pool, which is further supported by high levels of employer investment in training.

The region also performs well in innovation. A strong proportion of firms in the East report being “innovation active”—whether through product development, new processes, organisational improvements, or knowledge acquisition. The Scorecard confirms that this level of innovation activity is a crucial determinant of productivity growth.

Better Access to Finance

Small and medium-sized enterprises (SMEs) in the East are less likely than the UK average to cite external finance as a major barrier to growth. This suggests a more favourable lending environment, possibly due to a combination of strong regional banks, specialist lenders, and relatively low levels of economic uncertainty in the area.

The East also stands out for having one of the lowest shares of SMEs reporting legislation and regulation as a significant obstacle to business, indicating a comparatively supportive business environment.

Weaknesses in Investment and Business Births

Yet the region’s productivity challenge is far from solved. Two major areas of underperformance are investment and entrepreneurial activity.

The East lags behind the UK median in foreign direct investment (FDI) per job and gross fixed capital formation (GFCF). These are crucial indicators of the region’s ability to modernise infrastructure and support long-term business growth. The low investment figures also suggest a missed opportunity to capitalise on the region’s strengths in R&D and tech-enabled sectors.

Moreover, the business birth rate in the East remains below the UK median. New firm creation is a key indicator of economic dynamism, and the slower churn rate may reflect either barriers to entry or lower-than-expected levels of start-up support.

Digital Infrastructure: A Mixed Picture

When it comes to connectivity, the East of England is largely keeping pace. Over 86% of premises now have access to gigabit broadband, and 5G mobile coverage continues to expand. However, some rural and coastal parts of the region—especially in Norfolk and north Suffolk—still experience patchy service, limiting the potential of remote and digital-first businesses.

Labour Market Pressures and Health

A less visible but growing concern is the region’s economic inactivity rate due to long-term ill health. Though lower than in some regions, the share of the working-age population unable to work due to chronic conditions has risen steadily since 2019. This trend could erode labour market resilience unless tackled through integrated health, skills, and employment interventions.

What This Means for Policy

For local leaders and national policymakers, the message is clear: the East of England has enormous potential to lead in science, tech, agriculture, and clean energy—but strategic intervention is needed to unlock this productivity dividend.

Key policy recommendations include:

• Boosting investment in infrastructure and innovation to match skills and R&D strengths

• Supporting scale-up ecosystems to improve business survival and competitiveness

• Targeted digital upgrades to close rural-urban divides in connectivity

• Improving labour market participation through health and skills programmes

• Backing local strategies via devolution and place-based policy alignment

The East of England’s productivity challenge is not one of latent capacity but one of unleashing what already exists. By doubling down on what works—skills, innovation, finance—and addressing what holds the region back—low investment, weak start-up growth—the East can make a significant contribution to the UK’s wider productivity revival.

As the government refreshes its industrial and regional policy, now is the time to invest in the East—not just for local benefit, but for the nation’s shared economic future.

Note: The TPI UK ITL1 Productivity Scorecard is a powerful tool developed by The Productivity Institute's Productivity Lab. Scorecards assess five key productivity-driving domains:

1. Business performance (e.g., exports, R&D intensity, business formation)

2. Skills and training (e.g., education levels, employer-provided training, vacancies)

3. Policy and institutions (e.g., regulatory burdens, political uncertainty)

4. Health and well-being (e.g., inactivity due to ill health, workforce participation)

5. Investment, infrastructure & connectivity (e.g., FDI per job, capital investment, broadband coverage).

For each of the 17 indicators, regions and nations in the UK are flagged as:

• Green (above 105% of the UK median),

• Orange (within 95–105%), or

• Red (below 95%).

The visualisation, below, enables clear regional benchmarking, enabling regional stakeholders (policymakers, local authorities, and business leaders) to identify both strengths to build upon and weaknesses to address.