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Date Posted: 27/10/2016

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UK Labour Productivity returns to pre-downturn levels

UK labour productivity, as measured by output per hour, grew by 0.6% from Quarter 1 (Jan to Mar) of 2016 to Quarter 2 (Apr to June) 2016, the Office of National Statistics has reported. As a result, productivity on this metric has now returned to its pre-downturn level and has slightly exceeded it for the first time since 2008.

Extrapolating from performance prior to the downturn, output per hour in Quarter 2 2016 was 17.4% lower than the pre-downturn trend.

Output per hour in the services industries grew by 0.6% in Quarter 2 2016 when compared with the previous quarter and was 1.1% higher than a year earlier. Output per hour in manufacturing rose by 2.2% on the previous quarter and was 1.0% higher than a year earlier.

Output per worker was 0.2% higher and output per job was unchanged in Quarter 2 2016 compared with the previous quarter. Average hours worked fell on the quarter, resulting in higher growth in output per hour than for output per worker and output per job.

Whole economy unit labour costs were 1.2% higher in the second quarter of 2016 compared with the previous quarter and 1.9% higher than the same quarter last year, as earnings and other labour costs have outpaced productivity. Unit wage costs in manufacturing grew by 0.6% on the previous quarter and by 2.0% compared with the same quarter last year.

CIPD acting chief economist, Ian Brinkley, said, "The continued growth in productivity in the second quarter of 2016 is very welcome, but it is still too early to say that a sustained recovery is underway. We have seen similar encouraging figures in the short term in recent years, only for the recovery to fizzle out.

"With the long term challenges posed by Brexit and wider adverse global trends, it is imperative that we do not let this recovery slip away.

"Securing a sustained recovery can only come from increased investment in people and new technologies. The forthcoming Autumn Statement needs to show how the Government intends to support future productivity growth through investment in infrastructure, skills, and the science base.

"It is also vitally important that the new industrial policy being developed by the Government includes a strong focus on skills development across the workforce and measures to support behaviours and practices in the workplace that lead to more efficient working."

Tags: Office of National Statistics UK labour productivity CIPD