Productivity gap closing? UK's output reaches record high - but it's still considerably down on where we should be

Catherine Neilan
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Service industries drove the growth (Source: Getty)
Is the productivity gap closing?
Figures out this morning show that labour productivity in the UK – as measured by output per hour – grew 0.9 per cent between the first and second quarter this year.
That has taken it to the highest level ever recorded by the Office for National Statistics – although it is still considerably below what was expected for 2015 based on pre-downturn figures.
The UK is in fact 15 per cent below this extrapolated level.
Growth was all down to services, which rose to a record high in the second quarter, as manufacturing output per hour actually fell by half a per cent “continuing the exceptionally weak trend for this series since the economic downturn,” the ONS said.
Labour costs also rose – up 2.2 per cent on the previous quarter, the fastest rate since the last three months of 2012 – as wages grew.
Analysts have welcomed the news as showing welcome signs of growth for the UK's economy.
Howard Archer, chief UK and European economist at IHS Global Insight, said: “Encouraging news for the UK economy with labour productivity seeing much-needed substantial improvement in the second quarter. Furthermore, the recent upward revisions to GDP growth for 2011-2013 mean that the underlying trend looks marginally better.”
But he noted that productivity was “still limited” and required “sustained appreciable improvement if the UK is to enjoy healthy growth for a prolonged period”.
So, is the gap closing? Perhaps - but at a glacial pace.

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