Productivity growth at six-year high
HOPES have been raised that Britain could escape its decade-long productivity crisis as new figures confirmed the crucial measure of living standards jumped by 0.9pc in just three months last year.
Output per hour worked climbed at its fastest pace since 2011 in the quarter to September, which represents a crucial step if wages and living standards are to rise after years of poor performance.
Manufacturers and services firms reported growth of 1pc in the quarter, while the public sector also managed a respectable 0.7pc, the Office for National Statistics (ONS) said.
Productivity rose as the economy accelerated but growth in employment stalled, meaning that a steady number of workers produced extra GDP.
Business investment also increased over the same period, which should help productivity to grow further.
Despite the acceleration after years of miserable productivity figures, wealth created per hour worked is still up just 1pc over the past decade. If productivity had followed its pre-financial crisis trend then output per hour worked would be around 20pc higher today.
Howard Archer, chief economic adviser to the EY Item Club, said: “The rebound in productivity in the third quarter is highly welcome, but it needs to be seen in the context of a particularly poor first-half performance.
“There needs to be sustained improvement to ease concerns over the UK’S overall poor productivity record.”
He said unproductive “zombie firms” sustained only by debt at ultra-low interest rates could be one factor holding back the economy. A lack of new investment is also viewed as a problem.
Accountants, consultants and other business services contributed strongly to the productivity growth in the third quarter. The IT sector, energy industry, chemical and pharmaceutical companies, retailers and public services also made strong contributions.
The public sector has been on a strong run in recent years as civil servants and other officials have had to maintain or increase their output even as the number of workers has been cut back. The ONS said: “Between 2010 and 2016, total public service productivity is estimated to have increased by 3.6pc – an average growth of 0.6pc per year. This represents the longest sustained period of growth in public service productivity since the start of the series in 1997.”
Productivity fell in industries including mining and quarrying, water supply, and recreation and culture.
A so-called allocation effect has also dragged down productivity, as workers have moved from productive sectors into less productive industries, or as new workers and the unemployed have taken relatively unproductive positions, skewing the overall balance of the workforce.
Ian Brinkley, at the Chartered Institute for Personnel and Development, said: “While this increase is a positive start to 2018, 0.9pc is still a small step at a time when giant leaps are needed.
“Investment in skills will be key in 2018, creating higher skilled, higher value roles for people to progress into. Equally important will be improving the way people are both managed and developed at work.”