UK productivity: Fourth quarter of 2014 worsened and absence of growth is "unprecedented"

 
Lynsey Barber
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The last seven years of no productivity growth are unprecedented (Source: Getty)

The UK's productivity fell at the end of last year leaving rates of growth at "unprecedented levels" not seen since the end of the Second World War.

Productivity fell 0.2 per cent in the last quarter of 2014 compared to the previous quarter, leaving annual growth at 0.3 per cent for the year. It left output per hour at a lower level than before the financial crisis in 2007 and "little changed" on 2013.

The official figures from the ONS which include the revised historical estimates stretching back to 1948 paint a bleak picture of the last seven years in which there was no growth in labour productivity, despite other figures indicating growth in Britain's economy.

"Productivity currently remains limited compared to pre-crisis levels and the latest relapse will fuel concern that much of this has to do with structural factors," said IHS chief economist Howard Archer. "

"How productivity develops going forward will be a critical factor in how soon and how far the Bank of England raises interest rates. If productivity has taken a significant lasting hit, it means that the economy has less potential to grow without generating inflationary pressures and that interest rates will need to rise at an earlier stage," he added.

A previous rise in the third quarter of 0.5 per cent had fueled hopes that the productivity puzzle had finally been solved.

The latest figures will come as a blow to the Conservative party and George Osborne as they trumpet the recovering economy to potential voters ahead of May's General Election.

The latest figures on manufacturing show growth in the sector is at an eight-month high.

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