Productivity even more puzzling: UK productivity disappoints - workers are doing less with more

Jake Cordell
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Manufacturing suffered a particularly sharp fall in productivity in the final quarter of last year
Manufacturing suffered a particularly sharp fall in productivity in the final quarter of last year (Source: Getty)

Britain’s productivity plunged 1.2 per cent in the final quarter of 2015, according to fresh data released by the Office for National Statistics (ONS) this morning, adding to concerns about the UK’s so-called “productivity puzzle”.

Productivity is a measure of how much economic output is generated for each hour of work and is believed to be a key determinant of the general health of an economy, as well as the possibility for pay rises. Basically, if staff are making more widgets, businesses can afford to pay them a bit more without having to cut costs or raise prices elsewhere.

Read more: Why is UK productivity disappointing?

The figures out this morning, however, showed the amount each of us produces at work dropped 1.2 per cent in the final quarter of last year. This was because overall economic growth slowed to just 0.6 per cent, while at the same time we were putting in 1.7 per cent more hours - meaning the economy was getting less bang for our bucks.

"The crucial question for the UK economy is does the fourth quarter of 2015 mark a temporary relapse in productivity? Or is it evidence that the UK has an ongoing serious productivity problem?" asked Howard Archer of IHS Global.

The ONS estimated productivity across the UK is now 14 per cent behind where it should have been, had we continued ticking along at pre-crisis trends. Meanwhile, Germany, France and the United States were each at least 30 per cent more productive than the UK at the end of 2014.

Read more: Look how much richer the UK would be if we were as productive as everybody else in the G7

Even with the poor performance in the final quarter, last year still saw the fastest growth in productivity since 2011, though at just one per cent it is still markedly weak.

Manufacturing suffered particularly badly, with productivity dropping two per cent on the quarter, rounding off a year during which manufacturing workers produced 3.4 per cent less for every hour at work than they were at the end of 2014.