Unpacking the France–UK productivity gap: a sectoral analysis

By Dr Mateus Labrunie, Cambridge Industrial Innovation Policy

Productivity growth remains one of the most pressing economic challenges for advanced economies. In both France and the United Kingdom, sluggish productivity gains have constrained living standards and economic dynamism for over a decade. Yet, despite their many similarities, France has consistently outperformed the UK on productivity measures since the global financial crisis of 2008–09.

A new policy brief from Cambridge Industrial Innovation Policy explores this persistent gap in detail, asking: Which sectors drive the productivity difference between France and the UK, and what can this tell us about how each economy functions?

Using detailed sectoral data from the OECD’s Annual National Accounts for the period 2010–2019, the study decomposes the productivity gap into sector-level contributions. This approach allows us to see whether France’s advantage arises from higher productivity within sectors (the “intra-industry effect”) or from differences in economic structure — that is, which sectors are larger or smaller in each economy.

The findings reveal that while both countries share remarkably similar economic structures, France’s productivity advantage is concentrated in a handful of large, labour-intensive sectors, whereas the UK’s strength lies mainly in knowledge-intensive services such as finance and insurance. The analysis offers a nuanced picture of two similar economies whose sectoral differences help explain their divergent productivity trajectories.

Similar structures, divergent outcomes

France and the UK make for a particularly revealing comparison. They are large, developed European economies with similar industrial compositions and comparable histories of deindustrialisation. Both have seen a shift from manufacturing to services over recent decades, and both have been affected by the offshoring of production to lower-cost locations.

Employment data confirm this structural similarity. Between 2010 and 2019, the two countries exhibited nearly identical distributions of employment across five broad sectoral groupings: knowledge-intensive services, labour-intensive services, low/medium-tech manufacturing, medium/high-tech manufacturing, and other production (including agriculture and construction). The largest difference was a modest 3.8 percentage point higher employment share in knowledge-intensive services in the UK.

Yet despite this resemblance, France’s aggregate productivity — measured as value added per worker — was on average 9.7% higher than the UK’s over the 2010–19 period. During those years, France’s productivity advantage ranged between 5% and 16.7%, with only one exception: in 2015, when the UK briefly outperformed France by 3.3%.

This persistent gap raises an important question: If the two economies are so similar, why is France so much more productive?

The anatomy of the productivity gap

To answer this, the study uses a decomposition method that separates the productivity gap into two main effects:

• Intra-industry (productivity level) effect: differences in productivity within specific sectors across the two countries.
• Structural (employment share) effect: differences in the relative size of sectors within each country’s economy.

The analysis covers 29 market sectors (excluding non-market sectors such as education, health, and public administration, where productivity is difficult to measure) and then aggregates them into the five sectoral groupings mentioned above.

The results show that France outperformed the UK in 21 out of 29 sectors, while the UK led in only eight. More importantly, France’s productivity advantage is concentrated in sectors that account for a large share of total employment, amplifying their impact on aggregate productivity.

Labour-intensive services: the main driver of France’s advantage

The headline finding is that labour-intensive services are the primary source of France’s productivity advantage, accounting for 7.5 percentage points of the 9.7% aggregate productivity difference.

This grouping includes wholesale and retail trade, transportation and storage, administrative and support services, and accommodation and food services — all large employers in both economies. Within these sectors, France manages to achieve substantially higher value added with fewer workers, suggesting higher efficiency or better utilisation of labour and capital.

Key sectors contributing to France’s advantage

1. Wholesale and retail trade
   • Productivity in France was 24% higher than in the UK.
   • Both countries generated around $250 billion in annual value added, but France did so with 1 million fewer workers (3.7 million vs 4.7 million).
   • Given its scale — around 20% of total employment in both economies — this sector alone makes a major contribution to France’s lead.
2. Professional, scientific and technical activities
   • Productivity in France was 30% higher than in the UK.
   • France generated slightly higher value added ($188 billion vs $181 billion) with fewer employees (1.9 million vs 2.4 million).
3. Administrative and support services
   • Productivity in France was 35% higher, with $130 billion in value added compared with $118 billion in the UK, again achieved with fewer workers.
4. Transportation and storage
   • Productivity was 16% higher in France, supported by a slightly larger employment share (7.3% vs 6.4%).
5. Agriculture, forestry and fishing
   • France’s productivity was 30% higher, and its employment share was more than double that of the UK (4.0% vs 1.8%).
   • France’s annual value added in this sector was $42.1 billion, compared with the UK’s $17.4 billion.

Taken together, these labour-intensive sectors demonstrate how higher productivity in large employment bases can create substantial aggregate advantages, even in mature, service-oriented economies.

The UK’s strength: knowledge-intensive services

While France dominates in most sectors, the UK maintains a strong comparative advantage in knowledge-intensive services, which include finance, insurance, and certain business services. This grouping is the only one that favours the UK, contributing –3.5 percentage points to the overall productivity gap.

The standout sector here is financial and insurance activities, where UK productivity is 57% higher than France’s. During 2010–19, the UK’s financial sector generated $217 billion in value added — more than double France’s $102 billion — with only modestly more employees (1.1 million vs 0.78 million). This reflects the UK’s position as a global financial hub and the concentration of high-value-added activities in London.

These findings highlight that the UK’s productivity strengths are concentrated in a few high-value, capital-intensive sectors, while France’s advantage is broader and rooted in large, labour-intensive areas of the economy.

Manufacturing: balanced but with a French edge

Manufacturing, though smaller than in past decades, remains an important contributor to productivity performance. In both countries, medium- and high-tech manufacturing sectors such as aerospace, automotive, and chemicals play a significant role.

The analysis shows that France’s manufacturing productivity advantage stems mainly from higher productivity levels in medium/high-tech sectors (16.1% higher) and by a slightly higher productivity level in low/medium-tech manufacturing but with significantly larger employment shares (almost 3 percentage points larger).

• In other transport equipment manufacturing (which includes aerospace), France’s productivity was 119% higher than the UK’s.
• In chemicals manufacturing, France’s productivity was 30% higher.
• Conversely, in pharmaceuticals, the UK outperformed France, reflecting its globally competitive life sciences sector.

Overall, manufacturing contributes 4.3 percentage points to France’s productivity lead, showing that despite deindustrialisation, the sector continues to underpin national productivity differences.

Other production sectors: modest but positive for France

The “other production” category — comprising construction, agriculture, forestry, fishing, and utilities — also favours France, contributing 1.4 percentage points to the productivity gap.

Agriculture, as noted, is a key driver here due to its higher productivity and larger employment base in France. Construction also contributes positively, whereas mining and quarrying strongly favours the UK, with productivity levels over three times higher than France’s. However, given its small share of total employment (0.3% in the UK; 0.1% in France), its impact on aggregate productivity is limited.

Understanding the productivity-level differences

When looking purely at productivity levels by sector, the contrast between the two economies becomes even clearer.

• France’s largest productivity advantage is in aerospace and other transport equipment manufacturing, where productivity is more than double the UK’s.
• Labour-intensive services such as accommodation and food services, administrative and support services, and wholesale and retail trade also show large French advantages — between 16% and 59% higher productivity.
• In contrast, the UK leads in mining and quarrying (207% higher) and financial and insurance activities (57% higher).

At the level of broad sectoral groupings, France outperforms the UK in labour-intensive services (26.7% higher productivity) and medium/high-tech manufacturing (16.1% higher productivity), while the two countries are nearly equal in knowledge-intensive and low/medium-tech manufacturing. The UK’s only overall productivity advantage lies in other production sectors, largely due to mining.

Conclusion

This sectoral analysis provides a clearer picture of which sectors drive the productivity differences between France and the UK. The findings reveal that labour-intensive services — including wholesale and retail trade, administrative and support services, and transportation and storage — are the main drivers of the aggregate productivity gap. Together, these activities account for 7.5 percentage points of the 9.7% overall difference between the two countries. France’s advantage in these sectors reflects both higher productivity levels and their large shares in total employment, which magnify their aggregate impact.

At the same time, financial and insurance activities emerge as the largest contributor favouring the UK. This sector explains much of the UK’s comparative strength in knowledge-intensive services. Its productivity levels are 57% higher than France’s, and it also commands a larger share of employment (4.7% of total UK employment versus 4.1% in France). In contrast, France’s strong performance in professional, scientific and technical activities — where productivity is 30% higher than in the UK — illustrates the country’s strengths within the same knowledge-intensive grouping.

The analysis also highlights that France performs better than the UK in manufacturing sectors overall. In low/medium-tech manufacturing, this advantage stems from France’s higher employment shares, while in medium/high-tech manufacturing, it reflects higher productivity levels. Within these categories, France’s aerospace and chemicals industries stand out, with productivity levels 119% and 30% higher than those in the UK, respectively. Food and beverages manufacturing also makes a notable contribution due to its larger employment base in France (3.3% versus 1.8% in the UK).

Among other production sectors, agriculture, forestry and fishing play a significant role in France’s favour, with both higher productivity (30%) and a larger employment share (4.0% versus 1.8%). The UK’s advantage in mining and quarrying, meanwhile, reflects extremely high productivity levels — over three times higher than France’s — but this is offset by the sector’s small employment share, making its aggregate contribution relatively minor.

The importance of sectoral analyses

These results emphasise that understanding productivity differences requires looking beyond aggregate figures. Sectoral analysis serves as an effective “focusing device” for policy-makers and researchers alike, helping to pinpoint which parts of the economy most shape national productivity outcomes.

The study also highlights that the analysis of sectoral employment shares and productivity levels is only the first step. To design effective strategies for improving productivity, further research is needed into the underlying causes of these sectoral differences. For example, the prominence of labour-intensive services in explaining France’s productivity advantage suggests a need for deeper investigation into the drivers of productivity in these activities. Areas for exploration include infrastructural conditions, labour market dynamics, sectoral value-added structures, and the interaction between employment patterns and output growth.

By identifying where the productivity differences are most pronounced, the analysis in this policy brief lays the groundwork for more targeted research into why they exist — and how they might be addressed. The lessons drawn from comparing two structurally similar economies such as France and the UK can ultimately help inform more nuanced approaches to enhancing productivity across Europe’s service-based economies.

Download the report: The productivity gap across the channel