Insight can help the government deliver growth

“Securing economic growth will be a fundamental mission. My government will seek a new partnership with both business and working people and help the country move on from the recent cost of living challenges by prioritising wealth creation for all communities.”

The new UK Labour government finds itself in a deep hole. It wants to increase public spending (to deliver its manifesto promises), but it doesn’t want to raise taxes too much (to avoid breaking its manifesto promises). Fortunately, it has identified a ladder to climb out of the hole: economic growth. The recent King’s Speech reinforces the extent to which this government will rely on growth to save its bacon. Only economic growth can help it keep its promises – and more importantly, make the UK a better place to live.

Chancellor of the Exchequer Rachel Reeves has already identified the growth basics: increase investment in infrastructure (through borrowing instead of taxes, and by encouraging pension funds to invest more), and relax planning rules, allowing people to build new houses and wind farms more easily.

But this isn’t enough. The Social Market Foundation, a think tank, has welcomed the plans but says they are “not enough for a strategy for economic growth”.

One factor is critical to closing that gap: productivity. Britain has an infamous productivity problem compared to competitor nations. How can we solve it?

The government’s new industrial policy could help, by coordinating public and private investment to create economies of scale. A focus on key industries can create “network effects” where specialised companies and skilled people create a virtuous cycle of growth.

That raises the first big question: which industries should be supported? How do we know there will be demand for whatever products they make? Government-directed investment runs the risk of breeding white elephants: factories or buildings that churn out subpar cars, coal or steel that nobody really wants.

Readers know the answer to that dilemma: do some research. Good consumer insight can tell government which industries will be the success stories of the future. I trust that the Department for Business and Trade will conduct some rigorous research to understand the best opportunities and steer public money in the right directions.

However, research can play an even more important role in accelerating productivity and growth.

We tend to think of productivity as “how many widgets can we make in an hour?”. But a much better definition is “what value of widgets can we make in an hour?”. Framing the question like that reveals a crucial insight. Economic growth is not just about producing more stuff. It means producing better stuff that people want more.

Gross domestic product (GDP) is the total value of what’s produced in the economy, not the total volume. Creating more valuable outputs that people will pay more for is much better than churning out a bigger number of the same old objects. And better for the environment too.

So growth means making whatever people want more of. Goods and services that are a better fit to consumer needs. The second question for the economic strategists, then, is how do we achieve that? The answer, once again, is research.

The economy is held back from producing more and better stuff by a lack of understanding of what people really want. Too many companies, and too many government departments, produce what is easy for them to deliver, what their processes are set up for, instead of stopping to ask what is really needed.

The answer is to listen better to consumers. A successful growth plan must have a foundational place for figuring out what people want, which might not always be what they say or think they want – research should help people dig deeper inside their minds and identify true needs, even when hidden.

That is our industry’s job: to find out what people want. Once organisations know that, they can work out where to invest, what to make and how to use their resources most effectively. The economy will grow when companies create products that are a better fit to consumer desires.

When the government sets out to make public services work better, it should apply the same principle. Ask what people want from the NHS. Yes, to be treated faster and with the best medicine; but also, not to have their time wasted by organisational and communication bottlenecks.

Ask what they want from education. To gain knowledge and good qualifications, of course; but also, happier children and school schedules that fit with parents’ lives.

It is just as true for crisps, or banking, or air travel: what people want isn’t always just more of what you’re already giving them. Invest in research and you’ll learn what people really value – and what they’ll pay more for. A better understanding of what customers and citizens want will make everyone in the private and public sector more productive. 

Let’s start with something relatively easy. Go beyond that PowerPoint deck on the insight department’s shared drive and imagine everyone in every company, everyone in the civil service, and everyone in politics, watched one hour of tightly edited interviews and survey results to tell them what their customers, users or citizens really value. It might be transformative.

An economic strategy that recognises the importance of consumer research to productivity will unlock faster growth, create more wealth and enable more public spending. That’s what Reeves and Keir Starmer are trying to deliver, and we should all hope they succeed. The research industry should offer to play its part in showing where real growth in economic value – not just volume – can come from. A sustainable economy that delivers quality of life and provides the public services we all need is the reward on offer. Better research is one of the cheapest things the government could buy. 

Leigh Caldwell is the author of The Psychology of Price, a behavioural economist and the founder of Irrational Agency