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Puzzle solved? UK productivity is rising at its fastest in six years

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By admin , in Money , at November 15, 2017

Productivity grew at the fastest rate in six years during the third quarter, delivering some good news for a British economy stuck in a low gear since the financial crisis.

Output per hour grew by 0.9 per cent in the three months to September, the fastest rate since 2011 according to a flash estimate from the Office for National Statistics (ONS).

The welcome up-tick in productivity comes after two quarters of falls, and a decade of the UK economy failing to meaningfully improve. Productivity is now only 0.6 per cent higher than it was at its 2007 peak.

However, economists cautioned against too much celebration: "These data can be erratic from quarter to quarter and it is far too early to conclude that the long-term problems with weak productivity have started to be resolved," said John Hawksworth, chief economist at PwC.

“Certainly this short term rise in productivity has yet to translate into real wage growth, which remains clearly negative.

"Earnings growth is still stuck at 2.2 per cent compared to the latest consumer price inflation rate of three per cent, so there is no early end in sight to the squeeze on real household spending power."

Labour market data published by the ONS today showed wage growth stayed flat at 2.2 per cent in the three months to September, with real wages falling 0.5 per cent.

"The level of real pay remains 3.2 per cent below its pre-crisis peak in early 2008 excluding bonuses, and around six per cent lower including bonuses," added Hawksworth.

"Based on our forward projections, it seems unlikely that average real earnings levels will return to pre-crisis peaks until well into the 2020s."

Read more: Productivity in London is actually pretty good

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