UK enjoys largest jump in productivity for a decade but challenges remain

Britain’s economy enjoyed uncharacteristically solid productivity growth in the last three months of 2017 to record its strongest six months in more than a decade, new official figures show. Economic output per hour worked rose by 0.7 percent in the fourth quarter of 2017 – above its long-run average though marginally less than estimated in February – and the third-quarter figure was revised up slightly to 1.0 percent. Together they show the strongest growth since the second half of 2005. British productivity has largely stagnated over the past decade and is commonly seen as a chronic challenge. Over the past 10 years Britain’s productivity growth has been the weakest since modern records began and appears to be the slowest since the early 1820s. Overall output per hour, a driver of living standards, is only 1.8 percent above the pre-financial crisis peak it reached at the end of 2007.

Productivity in low-paid jobs in the UK is a particular issue. It lags between 20 and 30 percent behind equivalent roles in Germany, France, the Netherlands and the United States, according to a report from the National Institute of Economic and Social Research (NIESR) and the poverty-focused Joseph Rowntree Foundation think tank.  Agriculture, arts, entertainment and recreation were among the poorest performing sectors for productivity in Britain, and bad management appeared to play a major role, according to the study.

“Increasing levels of skill and rates of capital investment in low-wage sectors can play a part in closing the UK’s relative productivity gap with other countries,” NIESR researcher John Forth said. However, the UK’s weakness in these sectors lies at least as much in how skills and technologies are put to use, and so close attention must also be given to management practices and the organisation of work.”