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UK productivity slumps in first quarter of 2017

2 min read

Productivity fell sharply in the first three months of this year - the first decline since the end of 2015.

This morning’s announcement suggests the Government is still well off solving the ‘productivity puzzle’ that has plagued the UK economy since the financial crisis in 2008. 

Labour said the figures showed productivity was "going backwards" despite Philip Hammond making it one of his "central policy aims" as Chancellor.

Overall productivity was down 0.5% from January to March, down sharply from the +0.4% recorded in the final quarter of 2016.

The decline was particularly marked in the services sector, where output per hour – the measure of productivity – fell 0.6%.

That was offset by a positive performance in the manufacturing sector where, productivity grew by a modest 0.2%.


While the overall picture was gloomy, the Office for National Statistics said there were “striking” differences between different regions and sectors of the economy. 

Workers at financial services firms in London were around seven times more productive than staff in the lowest productivity areas.

Non-manufacturing production and the IT and communications industries in London, the south-east and east of England were among the other most productive regions, according to ONS estimates.

“UK labour productivity growth has struggled since the 2008 economic downturn, and the fall in the first quarter of 2017 brings to an end a recent run of quarters of positive growth,” said the ONS head of productivity, Philip Wales. 

“The experimental statistics that ONS releases today also reveal striking differences in productivity in different industries and regions,” he added.

“In 2015, output per hour worked in London’s financial and insurance industries was around seven times higher than in the lowest productivity regional industries”.


Shadow Chancellor John McDonnell claimed today's figures undermined the Tories' economic credibility.

"Not content with cutting public sector workers' pay, the government's failure to invest in the British economy means private sector wages continue to stagnate thanks to weak productivity, making the Chancellor's boasts about the economy look increasingly laughable.
"Only Labour has a serious plan to tackle the productivity crisis and equip our economy for the challenges of the future. And if the Tories are more concerned with arguing amongst themselves than acting in the interest of our country, then they should step aside and let a Labour government lead the way."


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