Growth up, but productivity dips

BRITAIN’S economic growth increased in the second quarter, easing fears of a looming slowdown.

The economy grew by around 0.5 per cent, according to researchers IHS Markit.

This was more than double the 0.2 per cent of the previous quarter but below the 0.7 per cent at the end of last year.

However, official data shows that Britain is still crippled by a productivity crisis.

The measure of how much wealth the average staff member creates at work has been sluggish since the financial crisis, which brought steady rises to a crashing halt. Output per hour fell 0.5 per cent in the first three months of this year, data from the Office for National Statistics shows, taking it back below pre-financial crisis levels.

Mike Cherry, national chairman of the Federation for Small Businesses, said: ‘Productivity is being stifled by chronic underinvestment, exacerbated by current unprecedented uncertainty and reflected in sluggish wage growth.’

Markit’s data shows that Britain has avoided the year-long recession predicted during the Brexit referendum campaign. Instead, growth has continued in every quarter. But Markit’s latest set of business surveys suggest a dip in optimism. Yesterday’s data for the influential services sector, which covers finance, law and high street businesses such as hairdressers, showed that growth had slowed to 53.4, where anything above 50 signals expansion. This is down from 53.8 in May but services firms also said they were creating jobs at the fastest rate for 14 months.

Meanwhile, household incomes are being squeezed as inflation rises more quickly than pay, reducing consumer spending power. Chris Williamson, of IHS Markit, said: ‘The overall picture is one of business spending, investment and exports failing to provide sufficient impetus to fully offset the consumer slowdown.’