Data shows productivity picks up

Ouput at six year high after weakest run since 1820s

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Output in British workplaces has shown signs of growth

Productivity among British workers has increased at its fastest rate for six years, according to official data.

Output per hour in the third quarter rose by 0.9% over the previous three months, the best performance since the second quarter of 2011.

However, this followed declines in both the second and first quarters, and output per hour was still up only 0.8% year-on-year. 

Productivity in Britain has stagnated since the global financial crisis more than in most other advanced economies, and has been a factor in the squeeze on living standards.

The past decade has seen productivity grow at its slowest since the early 1820s, when Britain was emerging from the Napoleonic wars, the Office for National Statistics said.

In November’s Budget, the Office for Budget Responsibility (OBR) substantially downgraded its forecasts for UK productivity growth over the next five years.

This resulted in a marked downgrading of its GDP growth forecasts and higher expected fiscal deficits over the medium term. Additionally, the Bank of England cited diminishing slack amid reduced UK growth potential as a significant factor in its decision to raise interest rates from 0.25% to 0.50%.

Howard Archer, chief economic adviser to the EY ITEM Club, said: “The pick-up in productivity in the third quarter suggests that some of the weakness in the first half may have been cyclical.

The rebound in productivity in the third quarter is highly welcome, but it needs to be seen in the context of a particularly poor first half performance. There needs to be sustained improvement to ease concerns over the UK’s overall poor productivity record.

“Certainly, the UK has a lot of catching up to do on the productivity front as it has been lagging its performance before the 2008/9 downturn.”

Continuing low productivity is put down to many of the newly created jobs being in less-skilled, low-paid sectors where productivity is limited. 

Mike Taylor, managing director at business performance and leadership consultancy Accelerating Experience. said: “UK productivity is showing signs of improvement, but this is no time for complacency.

“A more significant and sustainable rise in productivity growth will require increased long-term investment by both the government and businesses.

“Recent initiatives to boost investment spending and instigate a new industrial strategy are a positive sign of the government’s commitment to solving the productivity crisis.

“But UK PLC also needs to address the current leadership crisis at the heart of UK business which is strangling performance and hindering growth potential.

“Businesses are suffering from too much management and not enough leadership – this must change.”


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