Services up but manufacturing hurts UK productivity

The UK’s labour productivity rating between April and June fell for the second quarter running, according to data released on Friday by the Office for National Statistics (ONS).

Manufacturing sector causes drag on production

Output per hour worked was down 0.1 per cent in Q2, dragged down by the manufacturing sector, where productivity fell 1.3 per cent. Meanwhile, services sector productivity rose 0.2 per cent.A separate ONS report showed that the UK was less productive than the average among the G7 advanced economies in 2016. Output per hour worked was 15.1 per cent below the average in 2016, a slight improvement compared to the 15.5 per cent in 2015. The UK, however, had a better productivity record than Canada and Japan.Philip Wales, head of productivity at ONS, said, “Labour productivity fell back slightly in the second quarter as growth in the number of hours worked outstripped GDP growth. UK labour productivity continued to lag behind our international partners in 2016.“New innovative analysis suggests that this lower level of productivity was evident across all industries, although the size of the gap varies considerably.“UK companies in receipt of investment from abroad were significantly more productive than those that were not in 2015, even after controlling for firm size, industry and region.“However, this may be a reflection that international investment tends to flow into the most successful businesses.”

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Poor productivity an obstacle to UK growth

Mike Cherry, chairman of the Federation of Small Businesses, said, “It’s troubling to see sluggish productivity serving as such a persistent barrier to UK growth. The Chancellor must intervene to stop the productivity rot at the autumn Budget.“It’s particularly striking to see manufacturers, often touted as the great beneficiaries of a weakened pound post-Brexit, seeing such a marked fall in output per hour. No doubt spiralling input costs are starting to weigh on the sector.“The introduction of export vouchers, simplification of R&D tax credits and expansion of the Small Business Research Initiative would provide a much-needed boost to the industry.”Prof Geraint Johnes, professor of economics at Lancaster University Management School, said the weak figures did not augur well for UK wages, which are already rising at a slower rate than prices.“Poor productivity performance underpins the stagnation of real wages, and presents the government with a particular challenge since it appears likely that previous forecasts of earnings, and hence also of tax revenues, have been over-optimistic,” he said.For related news and features, visit our Enterprise section.Relocate’s new Global Mobility Toolkit provides free information, practical advice and support for HR, global mobility managers and global teams operating overseas.Access hundreds of global services and suppliers in our Online Directory  

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