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Productivity: Key Economic Indicators

Published Wednesday, May 18, 2016

Latest statistics showing changes in UK productivity and comparisons of UK productivity with other G7 countries.

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One of the most important factors in determining living standards is productivity – how much output is produced for a given input (such as an hour of work).

The more efficient the economy is, the more that can be produced in a sustainable fashion. In other words, higher productivity growth leads to a higher long-term growth rate of the economy.

Economic theory states that labour productivity also determines wages: the more productive an employee is, the more they are likely to be paid.

UK productivity

The average increase historically in the UK has been about 2% but in the seven years since the recession began, productivity has stagnated. The Office for National Statistics in March 2015 said this is “unprecedented in the post-war period”.

UK productivity

Productivity across the whole UK economy, measured by output per hour, is estimated to have increased by 0.9% in 2015, the most since 2011, though still below historical trends. After improving in the first three-quarters of the year, productivity fell in Q4 2015 by 1.2% compared with the previous quarter (due to more hours being worked).

In Q1 2016, early ‘flash’ estimates of productivity show that it increased by 0.4% on a quarterly basis. Compared with a year ago, productivity was unchanged (on this preliminary estimate).

International comparisons

International comparisons of productivity, 2014

In 2014, based on GDP per hour, the UK came sixth highest out of the G7 countries, with Germany top and Japan bottom. UK productivity was 18 percentage points below the average of the rest of the G7 countries, the widest productivity gap since at least 1991 (when the ONS data series began). Since 2007, only Italy has seen weaker productivity growth than the UK among G7 countries.

Commons Briefing papers SN02791

Author: Daniel Harari

Topics: Economic situation, Employment

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