UK still struggling with productivity

The latest figures from the Office for National Statistics (ONS) has shown that labour productivity – measured as output per hour – fell by 1.2 per cent in the final quarter of 2015.

During the same quarter both worker and job output remained unchanged however, across all measures, productivity was half a per cent higher in the final quarter of 2015 than in 2014.

The ONS also discovered that output per hour in services fell by 0.7 per cent on the previous quarter but was 1.1 per cent higher the year earlier.

Whilst the manufacturing sector, in particular, saw output per hour fall by 2.0 per cent on the previous quarter and was 3.4 per cent lower than a year earlier. Per unit labour costs were 0.4 per cent higher in Q4 and 1.3 per cent higher than the same quarter last year.

However, unit wage costs in manufacturing grew by 0.4 per cent on the previous quarter and by 3.6 per cent when compared with Q4 in 2014.

James Sproule, Chief Economist at the Institute of Directors, said: “The rise in wages, outpacing productivity, in the final quarter of last year is likely to help to underpin the consumer-led portion of the economic recovery.

“However the introduction of the National Living Wage, raising pay for 1.8 million workers, will very likely result in continuing poor performance in productivity in 2016. We are facing a period of dynamic economic and social change, and businesses changing are critical to our being able to cope and thrive in this environment.”

Link: UK productivity: Oct to Dec 2015