Productivity slump worse than 3-day week

PRODUCTIVITY plunged at the fastest pace on record during lockdown as millions of people were placed on furlough and the economy shrank by a fifth.

Social distancing on building sites and production lines and complications with working from home meant that output dived between April and June.

The Office for National Statistics (ONS) said the three-month period was the largest fall in productivity on record, including when the three-day week was temporarily introduced by Ted Heath ( pictured) in 1974 to save electricity during the oil crisis.

The amount produced by each worker fell by almost a fifth over the three- month period when compared with January to March, (ONS) data yesterday showed. This slump was driven by the fact that lots of people still had jobs but were on furlough or had come to another arrangement with their employers, which meant that the total number of hours worked fell dramatically. The ONS reckons around 27pc of the workforce – some 7.5m people – were either registered on the Government’s coronavirus job- retention scheme or had temporarily stepped away from their job without receiving any pay. But even looking at the output from those who were working throughout lockdown, the amount they produced per hour dropped by 2.5pc. This was also the biggest slump since records began in 1991, and outpaced a 1.3pc slide between January and March, which encompassed the very beginning of the UK’s coronavirus restrictions.

Yael Selfin, chief economist at KPMG UK, said the drop could be down to manufacturing plants and construction sites having to socially distance staff and bring in different shift patterns, which would make it more difficult to produce the same amount.

She added: ‘There could also have been temporary teething pains, for example with setting up technology, at the beginning when the focus was on pivoting to working from home.’

Paul Dales, chief UK economist at Capital Economics, said: ‘I suspect what’s happened is that there are a lot of people who are working but might still have had their hours wound down, but weren’t put on furlough. Perhaps they weren’t sacked but their companies said “we don’t need you to work as hard as you did before”.

‘Or maybe it’s due to the issues of working from home, such as working parents who have had the joys of home schooling.’

He added: ‘ We shouldn’t read too much into productivity numbers now, it’s not that people are slacking off or working too hard, there are a lot of funny short-term effects going on here.’

The figures from the ONS also showed business investment sank during the most recent quarter – by a staggering 31.4pc.

Many companies reined in spending because they were not sure how the pandemic and lockdown would hit their business, causing them to take prudent measures such as cutting dividends and putting any unnecessary spending on ice.