Written submission from Dr Huanjia Ma (PRO0132)
Written evidence from Dr Huanjia Ma, Research Fellow, City-REDI, University of Birmingham
5 December 2025
To The Business and Trade Committee
This submission addresses two questions from the call for evidence by the Business and Trade Committee: What are the main drivers of the UK’s productivity challenge? and What role should technology, skills, and innovation policy play in boosting long-term output per worker? Both are considered through a regional lens.
This submission is prepared by Dr Huanjia Ma, Research Fellow at the City-Region Economic Development Institute (City-REDI), University of Birmingham. The submission draws on research undertaken by the author and colleagues at City-REDI. City-REDI is a leading evidence-based and policy-focused academic research institute, committed to advancing people- and place-based inclusive economic, social, and environmental development.
The views expressed do not necessarily reflect those of City-REDI or the University of Birmingham.
The submission draws on recent research conducted at City-REDI examining regional inequalities in skills and innovation, the effectiveness of public R&D investment, the geography of digital skill shortages, sectoral growth opportunities, the role of public anchor institutions in regional economies, and the conditions for delivering large-scale housing retrofit programmes. We believe our research consistently shows that regional capabilities in skills, innovation, and infrastructure are central to the UK’s long-term productivity performance, and that addressing these challenges requires regionally focused and evidence-based policy interventions.
1. What are the main drivers of the UK’s productivity challenge?
Evidence from our recent work suggests that the UK’s productivity challenge is shaped by deeply embedded regional inequalities in skills, innovation investment, and the ability to absorb and diffuse new technologies.
(1). Skills shortages and geographical inequality
The UK faces persistent digital skill shortages that limit the country’s ability to realise the productivity benefits associated with technological change. Ma et al. (2024) show that shortages span advanced, intermediate, and basic digital skills, with significant regional variation. The devolved nations report the most severe shortages in advanced digital skills, alongside marked pressures in London and the South West. Their modelling shows that without intervention, these shortages could lead to substantial reductions in economic output and employment, with estimated losses rising from £4.4 billion in 2024 to £27.6 billion by 2030, and employment losses increasing from around 260,000 FTEs in 2024 to over 380,000 FTEs by 2030.
These findings indicate that digital skill constraints represent a structural barrier to productivity growth across both high-tech and foundational sectors. The modelling also suggests that sectors with low or medium direct digital skill requirements are affected through supply-chain spillovers, with low-tech industries facing costs of up to £14 billion by 2030.
Kollydas et al. (2025) show that the uneven concentration of the R&D workforce further contributes to spatial disparities. They estimate that 2.8 million people were employed in R&D-related occupations in 2023, up from 1.7 million in 2012. However, Wales and Yorkshire and the Humber consistently have the lowest shares of their workforce in these occupations, while London has seen the sharpest increase since 2012. These patterns reflect regional differences in workforce qualifications and industrial structure and mirror broader productivity gaps.
Demand is highly concentrated in a small set of advanced digital occupations: “programmers and software development professionals” and “IT business analysts, architects, and systems designers” accounted for 42.4% of all R&D job postings between 2013 and 2022. Wage patterns reinforce these pressures, with average hourly wages in R&D roles at £21.28 (compared with £14.56 outside R&D), although real wages have declined. Recruitment challenges are also more acute in some regions, with 63% of R&D-sector vacancies in the East Midlands classed as skills-shortage vacancies, compared with 22% in London.
The report also highlights demographic inequalities that further constrain productivity. Men are nearly three times more likely than women to work in R&D occupations (8.8% vs. 3.1%), and Bangladeshi (4.1%), Black (4.7%), and Pakistani (4.8%) workers are less likely to participate in R&D than the population average of 6%. Individuals with long-term health conditions or learning difficulties are also under-represented. These patterns point to an underutilisation of talent, limiting the diversity of ideas and capabilities that support productivity and innovation.
(2). Systematic barriers in innovation
Research on public R&D spending patterns (Ma et al., 2024) shows substantial geographical inequalities in R&D investment, with significant implications for productivity growth. The work highlights strong interregional linkages across high-tech and R&D-intensive sectors, but also shows that spillover effects from London and the Greater South East to the rest of the UK are limited. As a result, investment concentrated in the Greater South East generates fewer benefits for other regions.
The study also shows that regions with weaker absorptive capacity—whether due to skills gaps, institutional weaknesses, or lower firm capability—exhibit systematically lower returns to public R&D investment. This uneven capacity to convert R&D inputs into productivity growth reinforces territorial inequalities.
Taken together, these studies show that the UK’s productivity problem is best understood as a regional capability challenge, shaped by disparities in digital and R&D skills, uneven absorptive capacity, and weaknesses in the systems that support technology adoption outside the most research-intensive regions.
2. How will the Government’s housebuilding and infrastructure investment plans boost regional economies?
Evidence from Rafique (2025a; 2025b) highlights how investment in retrofitting social housing can support regional economic development and offers lessons for the Government’s wider housebuilding and infrastructure plans. The research shows that retrofit programmes create significant opportunities for local job creation, support regional supply chains, and stimulate the development of green construction and retrofit-related skills. When funding is stable and procurement systems encourage local participation and longer-term partnerships, these programmes help anchor economic activity in the region and crowd in private investment.
However, these benefits are not yet fully realised. Between 2015 and 2024, 64% of solar PV suppliers were SMEs, indicating strong potential for local economic uplift. Yet more than 70% of suppliers won only one contract, most contracts lasted less than 12 months, and awards were heavily concentrated in London and the South East. Rafique (2025a) finds that fragmented procurement practices, inconsistent standards, and skills shortages within the retrofit workforce restrict the efficiency and scale of delivery.
The implication is that housebuilding and infrastructure investment can deliver substantial regional economic benefits, but only when supported by coherent delivery systems, investment in local skills pipelines, and sustained policy and funding commitments that give firms the confidence to invest in capacity, innovation, and high-quality jobs in the regions where projects are delivered.
References:
Rafique, A. (2025a) Retrofitting Social Housing in the West Midlands Combined Authority (WMCA) Area: Overcoming Procurement Barriers for a Net-Zero Future. Innovation Procurement Empowerment Centre.
Rafique, A. (2025b) Mapping the UK’s Solar PV Supply Chain: An Analysis of Public Procurement Contracts. City-REDI Blog
Kollydas, K., Green, A. E., Taylor, A. & Ruggieri, D. (2025). R&D skills supply and demand: long-term trends and workforce projections. Department for Science Innovation and Technology (DSIT). Available from https://www.gov.uk/government/publications/rd-skills-supply-and-demand-workforce-trends-and-projections.
Ma, H., Ortega-Argiles, R., & Lyons, M. (2024). UK Levelling Up R&D Mission Effects: : A Multi-Region InputOutput Approach. (pp. 3-51). Manchester Institute of Innovation Research.
Ma, H., Kollydas, K., Lyons, M. & Green, A. (2024) Digital Skills Demand and Shortages and Their Impact in UK Regional Economies. Birmingham: City-REDI, University of Birmingham.