BCG's Raoul Ruparel Talks UK Productivity

Summary

Podcast Summary: BCG's Raoul Ruparel Talks UK Productivity

Podcast: Bloomberg Talks
Host: Bloomberg
Guest: Raoul Ruparel (Director, BCG Center for Growth; former adviser to UK PM Theresa May)
Date: February 23, 2026

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Overview

This episode features Raoul Ruparel from Boston Consulting Group discussing the findings of BCG’s new report on the UK's long-standing productivity problems. The conversation explores sector-by-sector trends, the deeper causes behind the UK’s lagging productivity, the changing landscape in financial services, and the challenge—and opportunity—of harnessing artificial intelligence to drive future growth.

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Key Discussion Points & Insights

1. Trade Uncertainty and Economic Context

• Host opens by referencing recent trade news, specifically Donald Trump’s announcement of a potential global tariff of 15%, raising concerns about increased uncertainty for the UK government.
• Raoul Ruparel:

  “It's obviously uncertain and adds another layer of difficulty for something the government to navigate.” (02:12)
  He notes it’s unclear how this tariff will affect countries with existing US trade deals but frames it as a familiar challenge for the UK.

2. UK’s Productivity Problem in a Global Context

• The UK’s productivity growth has lagged since the late 1990s, with major sectors seeing stagnation or decline. Compared to peers, the UK is underperforming in key areas.
• Raoul Ruparel explains:

  “The UK is doing worse in some big sectors than a number of peer countries and certainly then the global productivity frontier.” (03:22)

  • Financial Services: Once close to the world’s best, now falling behind.
  • Manufacturing: Stagnant for years, with the "frontier" (best performers) pulling away.
  • Information & Communications: UK lagging the US but still growing faster than G7 peers.

  “In information and comms, the frontier is in the last few years at least accelerating away from the UK, driven particularly by the US. But...the UK is actually still growing faster than the G7 in this sector.” (03:22)

3. Decline in Financial Services Productivity

• Surprising to some given the sector’s historical strength, the UK's financial services have stagnated for 15 years since the financial crisis.
• Raoul attributes this to:
  • Regulatory changes and a rebalancing of risk
  • Shift from banking/investment banking to auxiliary services like asset management and payments (less productive on paper, but growth opportunities exist)
  • Other countries, even those hard-hit by the financial crisis, have “done a slightly better job” of diversifying and growing productivity
• Memorable insight:

  “Our financial services sector... is less banking and investment banking dominated than before the financial crisis. We've moved more to sort of auxiliary services, asset management, payments etc and these services are...inherently a bit less productive.” (04:38)

4. Government Response and Policy Recommendations

• The interview probes what government can do to address this complex landscape.
• Raoul recommends:
  • Targeted interventions rather than one-size-fits-all
  • Addressing energy prices and planning in manufacturing
  • Regulatory reform in financial services
  • Reviving and focusing industrial strategy to support sectoral strengths

  “I think there are sectors like manufacturing where the government is pushing on some of the structural problems...but more needs to be done there.” (06:11) “Making sure that [industrial strategy] really is a focus and getting back to that core mission of driving growth will be really important.” (06:58)

5. Artificial Intelligence: Opportunity and Challenge

• The potential for AI to deliver large productivity gains is real, but the UK faces structural barriers:
  • A "long tail" of low-productivity firms has grown since 1997—the lowest 5% are now less productive than in 1997.
  • Productivity benefits from AI will only be realized if technology is widely adopted across all firms, not just leading ones.
  • Without broad adoption, AI could widen the productivity gap within the UK economy.
• Raoul’s call to action:

  “If you believe the productivity benefits from AI partly come through adoption...that is something that the UK has traditionally, traditionally not been great at. That’s why we have this long tail of low productivity firms.” (07:24) “What the UK has to avoid is...a few firms at the top adopting IT and getting productivity gains and then a big gap between those in the middle and the bottom.” (07:24)

  • Government should support the spread of best practices and practical use cases to help all firms—not just the most productive—adopt AI.

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Memorable Quotes

• On Trade Uncertainty:

  “It is another source of uncertainty, but the government and most countries have had to navigate this for the past year and I think they will be taking it in their stride.” (02:12, Raoul Ruparel)

• On Financial Services’ Decline:

  “We are still better than peers in financial services in many cases.” (03:22, Raoul Ruparel)

• On AI and Productivity:

  “The number of low productivity firms has increased in real terms since 1997...The lowest 5% are actually less productive in real terms than they were in 97.” (07:24, Raoul Ruparel)

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Important Timestamps

• 02:12 – Raoul Ruparel on global trade uncertainty and its effect on the UK
• 03:22 – Cross-country productivity comparison, analysis by sector
• 04:38 – Causes of the UK’s decline in financial services productivity
• 06:11 – Government interventions needed and sector-specific policy
• 07:24 – Challenges of AI adoption, the long tail of low-productivity firms

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Tone and Takeaways

The conversation is frank yet optimistic, recognizing the UK's structural challenges but highlighting potential for improvement with sector-focused policies and a smart approach to technology adoption. Raoul Ruparel brings a balanced, nuanced perspective, emphasizing that the UK's productivity story is not uniformly bleak—and the right policy responses could make a significant difference.

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For Listeners:

This episode is essential for understanding not just the headline statistics about UK productivity, but why those issues persist and what solutions might be effective. Ruparel’s sector-by-sector analysis and emphasis on spreading technological gains provide a detailed roadmap for policymakers and business leaders alike.

Transcript

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[Interviewer (possibly a Bloomberg host)]

to bring us back to the UK Now? Of course, the trade news on Friday, adding a new layer of complications to the challenges facing the UK Economy, but one that's been much more long running has been a lack of productivity growth. Catherine Mann recently pointing it as to again one of the key challenges facing the UK Economy. New report by Boston Consulting Group is looking at this issue at a sector by sector level showing Britain's biggest industries have been responsible for the decades long decline in productivity. That's roughly half the GDP growth rate since the end of the 1990s. Joining us now to discuss Raoul Ruparel, who is director of BCG's center for Growth. Raoul, good morning. I will get to your report in just a moment. But as someone who's also a former adviser to the Prime Minister, Theresa May, when she was in that office, I'm just wondering what your perspective is on the trade situation this morning. Donald Trump talking about a 15% global tariff. Now of course, it'd be an increase for the UK as well. I mean, is this particularly bad news for the government?

[Raoul Ruparel]

Yeah. Well, good morning. It's obviously uncertain and adds another layer of difficulty for something the government to navigate. But I think it's still early days in terms of seeing where this lands and whether it will be an increase for the UK it's not entirely clear what it means for countries that have struck a deal with the US Whether this would supersede that whether there would be another negotiation to try to bring down from it and also then where this lands in the medium and long term when they, when they revert beyond this short term measure. So I think, look, it is another source of uncertainty, but the government and most countries have had to navigate this for the past year and I think they will be taking it in their stride and trying to work behind the scenes and again re establish the deal that has been struck previously.

[Interviewer (possibly a Bloomberg host)]

Okay, so that's interesting on, on trade, but as you say, I mean the uncertainty is perhaps a concern for the UK economy. And look, your research on productivity is, is very interesting. We know that the UK has had a productivity issue for, for many years actually if you look data. But do you think in the work that you've done that the UK has a particular problem with productivity that is worse than other countries or than peers globally?

[Raoul Ruparel]

Yes, well, I think one of the issues we try to unpack is doing a cross country comparison at the sector level to see whether the UK is falling behind peers. And I think what we see is that the UK is doing worse in some big sectors than a number of peer countries and certainly then the global productivity frontier. So for example, in financial services we have fallen back despite being quite close to the to world, leading into the frontier in the 90s and early 2000s. In manufacturing we've stagnated for a long period and the frontier has pulled away from us a bit. But that's true of Most of the G7 and other developed countries. And then in information and comms, the frontier is in the last few years at least accelerating away from the UK, driven particularly by the US. But the flip side of that is that the UK is actually still growing faster than the G7 in this sector. So. So there are different things going on in different reasons. I would say info and comms, the UK is doing quite well, but not quite as well as the best like the. But in financial services and manufacturing we are falling back, although we are still better than peers in financial services in many cases.

[David Gura]

Yeah.

[Interviewer (possibly a Bloomberg host)]

The financial services figures I found of particular interest, it seemed somewhat surprising that the UK would be, as you say, falling behind on this despite the strength of the sector overall. What's driving that? What's weighing on the sector?

[Raoul Ruparel]

Well, I think it's been a long term challenge post the financial crisis which the UK and other countries have faced. But I think there's probably a combination of obviously regulatory ch choices that the UK has made and maybe not quite getting the right Balance in the medium and long term between risk and, and regulation. In terms of financial services, we've also seen a shift in the nature of our financial services sector in the uk. You know, we are less banking and investment banking dominated than we were back then before the financial crisis. And we've moved more to sort of auxiliary services, asset management, payments etc and these services are, at least in the stats, inherently a bit less productive. But obviously they may present growth opportunities in the future as other countries develop and maybe demand more of these services. So it's a nuanced picture, but it does say that other countries have done a slightly better job in the post crisis period. Even those that were hit quite hard by the crisis, such as the US to diversify and continue to grow their financial services productivity, whereas the UK has been stagnating in this sector for essentially 15 years.

[Interviewer (possibly a Bloomberg host)]

Yeah, I mean the findings of the report are really pretty stark. You talk about the few sectors which were able to prop up of the economy are no longer doing so. I suppose the big question from all of this research is what is the government doing about it now? What can it do to try to re energize an economy that on so many fronts is not performing as well as it should be?

[Raoul Ruparel]

Well, I think the point of our report was hopefully to highlight that you can take a nuanced approach to this and that there are certain sectoral strengths I mentioned in phone comms where we are doing well and we are are performing better than our G7 peers, for example. But I think it speaks to needing different interventions for different problems rather than just doing a one size fits all approach. And I think there are sectors like manufacturing where the government is pushing on some of the structural problems we see that have held the sector back as a whole. We know they're working on planning, we know they're working on looking at energy prices to an extent, but more needs to be done there and then I think we also know there are some things going on in the financial services sector on the regulatory approach to try and find a better balance here. But yeah, it speaks to the need to continue to push and really focus in on these sectors that can drive growth. And I think when it comes to the industrial strategy, that seems to have fallen by the wayside a little bit. So making sure that really is a focus and getting back to that core mission of driving growth will be really important.

[Interviewer (possibly a Bloomberg host)]

What about the question of artificial intelligence in this we're constantly told that there are huge productivity gains to be had from it. Does the UK look set up to be able to take advantage of those gains.

[Raoul Ruparel]

Well, I think one thing that comes through from this report is that we do have a very long tail of low productivity firms. The number of low productivity firms has increased in real terms since 1997, for example, and the lowest 5% are actually less productive in real terms than they were in 97. And I think what that tells us when it comes to AI is that if you believe the productivity benefits from AI partly come through adoption. So this being spread across the economy and adopted by as many businesses as possible, that is something that the UK has traditionally, traditionally not been great at. You know, that's why we have this long tail of low productivity firms, despite the fact that some firms at the top of the productivity spectrum are growing quite strongly. You know, we're not spreading that innovation, spreading new technology, spreading best practice. And so I think from an AI perspective, what the UK has to avoid is getting back into the same problem where we see a few firms at the top adopting IT and getting productivity gains and then a big gap between those in the middle and the bottom of the spectrum where it takes a lot longer for that to pass through. And if that happens again, I think we will miss out on of the potential productivity gains from AI. So there are definitely some learnings for how we should approach rolling out AI and maybe how the government can support the spread of best practice, the spread of innovation, and helping businesses understand use cases and how they can start practically using AI and allowing lowest productivity firms to catch up rather than just letting the most productive pull ahead.

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