UK productivity drops for third quarter in a row as crisis continues
UK productivity fell for the third successive quarter in the first three months of the year, according to official figures released today, as Britain’s productivity crisis rumbled on.
Read more: Urgent action needed to tackle stagnating productivity, economists warn
Labour productivity – output per hour worked – fell by 0.2 per cent year on year in the first quarter of the year, the Office for National Statistics (ONS) said today.
The figures show that Britain’s productivity crisis is continuing. Increasing productivity is central to improving living standards, as it creates wealth.
But the Bank of England has said productivity is around 20 per cent below where it would have been had it continued at pre-financial crisis levels.
Productivity levels are closely related to investment, as new technology and machinery helps workers do more work. Yet business investment has been declining in recent months, due largely to the uncertainty created by Brexit.
Howard Archer, chief economic adviser to the EY Item Club, said “under-investment and an inefficient allocation of resources” may be one of the factors to blame.
He added: “Many of the new jobs that have been created are in less-skilled, low-paid sectors where productivity is limited.”
Katherine Kent, head of productivity at the ONS, said the productivity crisis had caused “sluggish wage growth in recent years”.
She said private sector workers have missed out on “an estimated average of £5,000 per year”.
The first quarter figure was dragged down by a 0.9 per cent year-on-year fall in manufacturing productivity, the ONS said. Productivity in the service sector grew by 0.2 per cent.
Tej Parikh, chief economist at the Institute of Directors (IoD), said: “With political risks clouding business decisions, firms have lacked the confidence to invest in the equipment and technology that drive efficiency gains.”
He said business leaders “want to see urgent progress on our skills agenda, infrastructure, and business support”.
Read more: Pound falls as UK economy shrinks by 0.4 per cent in April
Tony Danker, chief executive of productivity campaign Be the Business, recommended businesses make “small improvements to boost performance by just two to three per cent per year”.