Belfast Telegraph

UK productivity declines for third quarter in a row

Politicians and economists have weighed in on the so-called ‘productivity puzzle’.

Britain’s productivity performance since the financial crisis has been weak (PA)
Britain’s productivity performance since the financial crisis has been weak (PA)

Economists and the Labour Party have voiced concerns over the UK’s productivity crisis after fresh figures showed a third straight quarter of decline.

Output per hour fell by 0.2% in the three months to March, compared with the previous year, the Office for National Statistics (ONS) said.

It is the third successive quarter in which the measure has declined, with the latest figures showing a greater decrease than the 0.1% drop seen in the final quarter of last year.

Manufacturing experienced a decline of 0.9% in the period, as the total average hours worked grew twice as fast as recorded output.

However, services output increased by 0.2%.

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(PA Graphics)

The drop in productivity will add to concerns of a “productivity puzzle” in the UK, which has seen output per hour grow slowly since the 2008 economic downturn.

Howard Archer, chief economic adviser to EY Item Club, said productivity had partly been impacted by businesses favouring hiring over costly investment.

“There are a number of other factors that may have hurt productivity,” he said.

“In particular, many of the new jobs that have been created are in less-skilled, low-paid sectors where productivity is limited.

“There is also an argument that the UK has been particularly poor at transferring technology and know-how from the most productive companies to other companies.”

Even if the clouds of uncertainty do lift later this year, it will be a while before pent-up investment activity filters through to the productivity numbers Tej Parikh, from the Institute of Directors

Labour shadow chancellor John McDonnell said the latest data was evidence of a “failure” on the Government’s part to deal with the productivity puzzle.

“For nine long years, we’ve seen not just brutal austerity but also an utter failure by the Tories to get a grip on the productivity crisis,” he said.

“While the Tory leadership candidates talk about tax cuts for the rich, it’s clearer than ever that it’s time for a Labour government, which will tackle the productivity crisis through a package of policies including a National Transformation Fund, National Investment Bank, and £10 per hour real living wage.”

Commentators also pointed to Brexit uncertainty as a factor in the UK’s poor performance.

Tej Parikh, chief economist at the Institute of Directors, said: “With political risks clouding business decisions, firms have lacked the confidence to invest in the equipment and technology that drive efficiency gains in their organisations. Even if the clouds of uncertainty do lift later this year, it will be a while before pent-up investment activity filters through to the productivity numbers.”

PA

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