UK productivity at 18-year low compared to G7

Julian Harris
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WORKERS in the UK are producing a significantly lower output per hour than their peers in similar countries, with official calculations published yesterday revealing the widest gap in productivity since 1994.

The situation in the UK worsened between 2011 and 2012, the Office for National Statistics (ONS) revealed, in contrast to the average across the rest of the G7, where output per hour and output per worker both improved.

Using an index to compare different countries, the ONS found that the UK was 16 percentage points below the average for the rest of the major industrialised economies in 2012 when comparing output per hour.

In terms of output per worker, the UK trails by 19 percentage points.

“The marked decline in UK productivity in 2012 extended the UK’s poor productivity performance since the 2008-09 downturn,” said Howard Archer of IHS Global Insight.

One explanation may come from companies’ responses to the economic downturn. With unemployment in the UK lower than in many other states in Europe, some firms may have kept staff on in the expectation of business picking up. Low productivty workers in other nations are often unemployed as a result of high minimum wages or lots of red tape, artificially bolstering productivity figures.

Another factor is that so-called zombie companies – propped up by low interest rates – remaining in existence despite being generally unproductive.

Recent years of economic strife have hit UK productivity hard. By 2012 output per hour was two percentage points lower than in 2007, “and 15 percentage points below the counterfactual level had productivity grown at its average rate before the recession,” the report adds.

The ONS data also showed that Brits work an average of 1,648 hours a year, compared to 1,790 in the US and just 1,397 in Germany.