- Third quarter of 2017 saw output per hour grow by 0.9 per cent, ONS revealed
- Productivity growth over last decade the weakest since modern records began
Britain’s economic productivity grew at its fastest rate in more than six years during the three months up to the end of September 2017.
The third quarter of last year witnessed output per hour worked growing by 0.9 per cent, compared with the three months before. The productivity hike was the first since late 2016 and the biggest rise since the second quarter of 2011, the Office for National Statistics (ONS) revealed.
The rise was helped by a fall in the number of people in work over the period, as there were less people to divide the total production between when doing the calculations.
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Britain’s economy slowed last year, as the value of the pound plunged, following the decision to leave the European Union. The resulting higher inflation rate hurt consumer spending and business confidence.
Howard Archer, an economist at forecasters EY ITEM Club, said productivity was likely to have recovered further in the final three months of 2017. Early indications suggest growth remained solid while the number of people in work fell.
But the economist was less positive about the longer term. He said: ‘A major risk is that prolonged uncertainty and concerns over the UK’s economic outlook ends up weighing down markedly on business investment and damages productivity.’
A weaker productivity outlook drove the Bank of England’s (BoE) decision in November 2017 to raise interest rates for the first time in more than a decade. The BoE believed the economy would struggle to grow much faster than 1.5 per cent a year without creating excessive inflation.
That said, the ONS data showed unit labour costs rose by the least since the second quarter of 2015, increasing by 1.3 per cent. Labour costs measure how much it costs to produce a given amount of output and are key drivers of inflation.
Britain’s government has made repeated efforts to boost productivity, and has said that past weakness were partly due to strong job creation, which pushed unemployment to its lowest in more than 40 years.
ONS data also show a drag from the declining North Sea oil and gas sector, and from heavy losses in financial services after the global crisis. Low investment and inconsistent management quality have also weighed on productivity, economists have said.
Over the past 10 years productivity growth was the weakest since modern records began and appears to be the slowest since the early 1820s, when Britain was emerging from the Napoleonic wars, the ONS statistics stated.
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