London financial services and several regional manufacturing industries "account for much" of recent UK productivity growth slowdown

 
Rebecca Smith
The ONS said its analysis shed light on industries and regions driving the UK's recent economic slowdown
The ONS said its analysis shed light on industries and regions driving the UK's recent economic slowdown (Source: Getty)

London's financial industry and several regional manufacturing industries account for a large chunk of the recent slowdown in UK productivity growth, new analysis from the Office for National Statistics said today.

The capital's financial services industry - and several regional manufacturing industries - made a considerably reduced contribution to productivity growth in the five years to 2016 than over the five years to 2007.

The ONS said services industries in London and the South East were also prevalent among the regional industries whose contribution had fallen the most.

Read more: Still puzzled? UK productivity has risen by the most since 2011

As for regional industries where contributions had shot up the most over that time period included the real estate industry in several places.

The ONS said the analysis shed "considerable light" on industries and regions driving the UK's recent economic slowdown.

UK productivity up 0.7 per cent for October to December

UK productivity is estimated to have grown by 0.7 per cent in the final three months of last year, according to today's figures, marking the second quarterly rise on the trot after falling in the first half of 2017.

It leaves productivity 1.8 per cent above its peak in the fourth quarter of 2007 ahead of the economic downturn.

Across the UK, output per worker and output per job both grew by 0.1 per cent between the third and fourth quarter. The ONS said the difference between these measures and output per hour reflected a fall in average hours per job and per worker.

Productivity grew in both services and manufacturing industries, with the former up 0.3 per cent on the previous quarter and manufacturing productivity up by 2.6 per cent.

Earnings and other labour costs outpaced productivity growth, leading to unit labour cost growth of 2.1 per cent in the year to the fourth quarter, up from the 1.4 per cent rise in the year to the third quarter of 2017.

“The rebound in productivity over the second half of 2017 is a positive development, but it needs to be seen in the context of a particularly poor first half performance," said Howard Archer, chief economic advisor to the EY Item Club. "There needs to be sustained improvement to ease concerns over the UK’s overall poor productivity record since the deep 2008/9 recession."

He said:

The UK has a lot of catching up to do on the productivity front.

The ONS reported that productivity in the fourth quarter of 2017, as measured by output per hour, was 16.4 per cent below its pre-downturn trend – or, equivalently, productivity would have been 19.6 per cent higher had it followed this pre-downturn trend.

Read more: We should learn from the little guys to get out of our productivity rut

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