UK productivity rebounds but still trails pre-crash average

Productivity in the UK rebounded in the second quarter after a weak start to the year, but remained below its pre-crisis average.

Output per hour grew by 1.4% in April to June compared with the same period a year ago, according to the Office for National Statistics (ONS).

Against the first quarter, output rose 0.5%, providing a welcome boost after a drop of 0.6% in January to March.

Workers clocked in for fewer hours in the second quarter, but output growth was stronger.

This was the third improvement in the past four quarters, with the result that annual performance was at its best since the fourth quarter of 2016.

Annual labour productivity is up for the seventh consecutive quarter.

Economists said the fresh data was a positive signal for the economy, but that productivity was unlikely to return to average growth of 2%, a figure based on economic performance prior to the financial crisis.

Howard Archer, chief economic adviser at EY Item Club, said that the productivity puzzle was likely to put pressure on businesses to find solutions.

“Companies are likely to increasingly prioritise productivity-enhancing measures, and there is likely to be a growing incentive to undertake investment aimed at saving labour,” he said.

But he added: “A serious concern is that the heightened possibility of the UK leaving the EU without a deal next March will cause companies to limit their investment in the near term with damaging implications for productivity. Disappointingly, business investment fell in both the first and second quarters of 2018.

“Even if a Brexit transition deal is ultimately ratified and comes into effect in March 2019, ongoing uncertainties over the future trade relationship between the UK and EU may well still limit the upside for investment.”

On an output per worker basis, labour productivity was up 0.2% compared with a year ago and 0.3% up on the quarter.

The ONS also compiled data comparing productivity on a region-by-region basis.

Although London had the highest level of output per hour for services, the North West and Scotland had the highest productivity in manufacturing.

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