Belfast Telegraph

Wednesday 1 October 2014

UK productivity is falling behind

The ONS found a drop in output in the UK in 2012 has created the widest productivity gap since 1994

Productivity in the UK is falling behind the world's richest economies and is worse than before the recession, according to new figures.

The Office for National Statistics (ONS) found that a drop in output in the UK in 2012 compared to a rise in output across the rest of the G7 countries has created the widest productivity gap since 1994.

Last year the country's output per worker was 19% below the average for the rest of the major industrialised economies, while output per hour was 16% lower.

The ONS said the figures are a "first estimate" of how labour productivity in the UK compared with the G7 countries, France, Germany, US, Japan, Canada and Italy, last year. It also found that output in the UK has fallen by 2% compared to 2007, before the economic crisis hit.

John Philpott, the former chief economic adviser at the Chartered Institute of Personnel and Development, said the weak productivity figures prove the UK is not experiencing a "genuine recovery". He said: "The bad news is that the UK is falling fast down the international productivity ranking

"The relative improvement in the UK's productivity performance from the mid-1990s to the late 2000s has clearly gone into reverse in an economy reliant on falling real wages, rather than increased output, as the main driver of employment growth.

"The drop in the UK's international productivity ranking in 2012 proves that strong employment growth fuelled by falling real wages is symptomatic of relative economic weakness rather than strength. While the real wage squeeze is preferable to even higher unemployment, these latest international productivity figures show the UK economy can't be deemed to be experiencing a genuine recovery until we see firm evidence of both stronger output growth and rising real incomes."

But Chancellor George Osborne has claimed the country is in the "early stages of recovery" and "turning a corner".

Speaking at the Institute of Directors' annual convention he said: "The British economy is looking better. The economy is growing in all sectors. British businesses have now created 1.4 million new jobs. And almost five years to the day after the near collapse of the British banking system we have started to sell off our shares in the banks and to get taxpayers' money back.

"Britain is turning a corner but we have a long way to go. At home, our economy is still in the early stages of recovery. Unemployment and our deficit are both still too high."

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