House of Commons Library

Productivity: Key Economic Indicators

Published Friday, August 16, 2019

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

Historically, UK labour productivity has grown by around 2% per year but since the 2008/2009 recession it has stagnated. The level of labour productivity in Q2 2019 was 1.3% above what it was over 11 years earlier in Q4 2007 (the pre-recession peak level).

UK productivity level

Productivity fell by 0.2% in Q2 2019 compared with the previous quarter, and by 0.6% compared with a year ago (Q2 2018) based on the latest ONS ‘flash’ estimate.

International comparisons

In 2016, ranked on GDP per hour worked, the UK came fifth highest out of the G7 countries, with Germany top and Japan bottom. UK productivity was 16% below the average of the rest of the G7 countries, the largest since at least 1995 (when the ONS data series began).

G7 comparison of productivity levels

Recent new evidence from the OECD showed that the UK’s productivity gap with the G7 average is not as great as previously thought, due to the different ways countries measure hours worked. The ONS is exploring this research.

 

Commons Briefing papers SN02791

Author: Daniel Harari

Topics: Economic situation, Employment

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