Productivity rise insufficient to ease fears

PRODUCTIVITY figures released yesterday show a continued improvement in output per hour in the UK, but confirm it is still a major problem for the economy.

In the three months to December, productivity grew by 0.7pc, according to the Office for National Statistics (ONS).

This is a slight downgrade from the ONS’S so-called “flash” estimate of 0.8pc in February.

It marks a second quarter of growth above the pre-crisis level of 0.5pc. It is slightly lower than that seen between July and September, in which productivity ticked up by 0.9pc.

The UK continues to lag other major economies, however. In 2016, workers were 16.3pc less productive, on average, than in other G7 nations.

The increase in productivity levels seen at the end of last year, as measured on an output per worker per hour basis, improved as the average number of hours worked fell, rather than because of an improved rate of output for an identical number of hours.

The figures must also be considered in terms of the poor performance on productivity in the first half of the year, economists warned.

Compared to the same period a year earlier, growth in productivity in the final three months of last year was close to 1pc. That is still half the rate witnessed before the financial crisis, of 2pc per year.

Howard Archer, of EY Item Club, said: “Part of the UK’S recent poor labour productivity performance has undoubtedly been that low wage growth has increased the attractiveness of employment for companies.”

Cheap labour helped keep employment levels up during the recession and may have been “lifted” during 2017 by some UK companies being keen to take on workers, in response to growing fears of labour shortages, Mr Archer added.