One silver lining to the destructive effects of the Covid-19 pandemic is that many companies have adapted to it by adopting new technologies. According to Be the Business, a business support agency, 66% of UK companies have adopted new digital technologies (such as remote working technologies or cloud computing) or new management practices since the start of the pandemic. The speed with which new technologies have been adopted, and the unprecedented scale across different sectors and regions, presents an enormous opportunity to make the UK economy more productive, but also a challenge to our existing social safety net.
The UK has long suffered from chronic business underinvestment in new technologies. In the UK, more than in other similarly-sized countries like France or Germany, the gap between frontier firms embracing innovation rapidly and slow adopters has been growing over the decade. The country has an unusually long tail of productivity laggards. This, according to the Bank of England, is one of the main reasons behind the UK’s “productivity puzzle”. But just when new firms incorporate technologies and new workers enter the digital space, not everyone will be affected equally. Workers in jobs which are intensive in routine tasks will face displacement sooner than anticipated.
Early evidence suggests that Covid-19 has indeed accelerated technology adoption. The question is whether this short-term response will translate into permanent changes, with lasting economic benefits. There is now a unique opportunity for the UK government to capitalise on this and drive technology adoption after the pandemic, improving lagging UK productivity after a decade of stagnant growth. At the same time the government has to consider how the social safety net should be extended to households bound to lose as a result of faster technological change.
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