Brexit blamed as productivity falls at fastest pace for five years

8 October 2019, 12:12 | Updated: 9 October 2019, 08:43

Productivity among the UK's workforce has fallen at its fastest annual rate for five years, according to official figures.

The Office for National Statistics (ONS) reported that output per hour worked fell 0.5% between April and June compared to the same period last year.

The figures showed a 0.2% dip on a quarter-on-quarter basis.

The deputy chief economist at the ONS, Richard Heys, said: "Labour productivity has continued the weak trajectory it has followed over the last year.

"Both manufacturing and services saw a fall on this time last year, with only a couple of other relatively small sectors contributing positively.

"This confirms the broad base of the UK's productivity challenges."

Solving the so-called productivity puzzle has proved a tough nut to crack since an emphasis on bolstering output was identified as a priority in the wake of the financial crisis.

Progress can be linked, but no exclusively so, to the fortunes of the UK economy which has slowed as the clock ticks down to the Brexit deadline of 31 October with still no clarity on whether the UK will leave the EU with a withdrawal deal or not.

The economy would enter recession should a second consecutive quarter of negative growth, between July and September, be confirmed.

The US-China trade war has been blamed for denting demand globally.

But business groups said it was clear Brexit uncertainty was taking its toll on domestic output.

The ONS figures showed a 1.9% hit in manufacturing productivity, on an annual basis, in the second quarter.

A 0.8% decline was measured for the service sector.

Tej Parikh, chief economist at the Institute of Directors, said: "These figures hammer home the impact uncertainty is having on the business environment.

"Unsure of what's around the corner, businesses' investment in the new equipment and technology that drives up their performance has been stifled."

Tom Hadley, director of policy and campaigns at the Recruitment & Employment Confederation, said: "As productivity falls for another quarter, government needs to ask itself serious questions about how to sustain rising pay and meet ambitions for a higher National Living Wage.

"Addressing skills shortages is part of the answer to this conundrum. As REC's jobs data shows, businesses up and down the country, in sectors like IT, healthcare and logistics, are struggling to find the skills they need.

"In the shadow of Brexit uncertainty, businesses are also scaling back ambitions to hire new staff and invest in their operations.

"But this isn't just about skills, it is also about employers getting the best of their people through good management practices and by boosting progression opportunities."