UK productivity in the third quarter of 2022 was barely higher than in the year before the Covid-19 pandemic began, according to official data that will add to gloom over the country’s economic outlook.
Output per hour worked — the key measure of labour productivity — was 1.6 per cent higher in the three months to September than its average over the course of 2019, and up by just 0.1 per cent during the last quarter, the Office for National Statistics said on Thursday. Output per worker was 0.5 per cent higher than the 2019 average.
This means that despite big changes to working practices sparked by coronavirus lockdowns, there has been no change in the snail’s pace growth seen in UK productivity since the global financial crisis.
This stagnation is seen as one of the biggest challenges facing the UK economy, because rising productivity — workers producing more for a given level of inputs — is a crucial underpinning if wages and living standards are to rise without stoking higher inflation.
The ONS figures showed that the biggest drag on productivity across the economy came from public services, where output per hour worked remained 7.4 per cent below its pre-coronavirus level.
This is likely to reflect the crisis engulfing the NHS, where a big increase in funding and staffing since the pre-pandemic period has not led to a corresponding increase in the number of patients treated.
The latest figures will inform the next official forecast from the Office for Budget Responsibility, the fiscal watchdog, which in October took a more optimistic view than other forecasters of the UK’s likely productivity performance. The OBR has already told the Treasury that when it publishes its next forecast, alongside the March Budget, it expects to cut its prediction for UK gross domestic product in 2027-28 by about 0.5 per cent compared with last year’s Autumn Statement.
The poor productivity growth is one of the key reasons why UK average incomes have fallen behind those of many other rich economies in recent years.
Earlier this month, the ONS published figures comparing productivity performance across the G7 which showed output per worker, a more reliable cross-country measure than output per hour worked, was higher in every other country (barring Japan, for which there were no figures) in 2021 than in the UK. In the US, it was almost 50 per cent higher and the UK lagged the G7 average by 16 per cent.
