UK labour productivity increases at fastest rate since financial crisis

The productivity of British workers in the final six months of 2017 increased at the fastest rate since before the financial crisis, handing a rare boost to the government.

Labour productivity, or economic output per hour worked, grew by 0.7% in the three months to December, marking the second consecutive quarter for positive growth, the Office for National Statistics said. Together, the two periods showed the strongest growth since the second half of 2005.

But despite the positive performance, the rate of increase in worker efficiency for last year as a whole still languished below its pre-crisis levels, following a weak start to 2017.

ONS deputy chief economist Richard Heys said much of the increase could have come from a fall in average hours worked, adding: “A weak start to the year means annual growth was only 1%, half the historic average rate.”

Fewer hours worked could flatter the productivity growth rate, meaning companies may not have managed to substantially boost their economic output. The ONS also said the productivity of British workers still remains well below the rates that could have been achieved had productivity growth continued at the pre-downturn rate.

Sluggish growth in the efficiency of workers in Britain, held back in part since the financial crisis by the creation of low-skilled jobs, has been key to holding down wage growth and rising living standards across the economy. As a result, boosting productivity has become a key priority among ministers, who are attempting to use the industrial strategy to improve efficiency rates.

The improvements in the final quarter of 2017 were driven by non-financial services firms such as shops, hotels and restaurants, as well as manufacturers. The financial sector and firms involved in industrial production, such as those involved in electricity, gas and agriculture, acted as a drag on the growth rate.

Treasury minister Robert Jenrick said the figures were encouraging. “We want to increase productivity growth to ensure higher living standards for people across the country.”