Productivity slumps for the first time since 2015 as Britons take longer to produce less

Jasper Jolly
Follow Jasper
Output per hour in Britain fell in the first quarter (Source: Getty)

Productivity in the UK fell at the start of the year for the first quarter in more than a year as growth across the British economy stalled.

Output per hour, the measure of how efficiently British workers create wealth, fell by 0.5 per cent in the first three months of the year, according to initial estimates reported by the Office for National Statistics (ONS).

Productivity slumped to its lowest level since the fourth quarter of 2015 after a year of steady, albeit weak, rises.

Read more: Productivity crisis worsens as output struggles despite firms hiring more

The UK has struggled since the global financial crisis to return to the average levels of productivity seen before 2007. While comparisons in productivity between countries can be misleading, the Organisation for Economic Co-operation and Development (OECD) shows the UK lagging behind rivals such as France and Germany.

The UK economy has not returned to the previous trend growth of 2.3 per cent annual increases in the nine years since the economy began to contract, according to Matt Whittaker, chief economist at the Resolution Foundation. The ONS reported last quarter that productivity would have been 19 per cent higher had the economy continued its pre-downturn trend.

Part of the reason for the slump in productivity came from employers holding on to workers despite falling production, while a sharp decline in business investment also contributed.

Alpesh Paleja, principal economist at the Confederation of British Industry (CBI), said: “Maintaining the UK’s reputation as a great place to do business, for example by increasing research and development spend to three per cent of GDP by 2025, will help boost the UK’s productivity. This is the only sustainable route to higher wages, and better living standards.”

Read more: Beware comparing Brits' productivity unfavourably to that of the French

Other forms of investment that could improve productivity include greater expenditure on training, both by government and business. That was part of the rationale behind the recently launched apprenticeship levy, although it has previously raised objections that not all of the money levied is being redirected into training programmes.

Steve Hill, external engagement director at The Open University said: “The UK’s poor productivity is a matter of national concern and improving productivity lies in employers building skills rather than buying them.

"There is a new opportunity for organisations operating in England to retrain and upskill employees of any age via the apprenticeship levy, but organisations all across the UK should embrace work-based learning to realise the talents of their staff.”

Related articles