Britain's productivity gap with G7 peers widest in 20 years

LONDON Wed Sep 18, 2013 1:55pm BST

A construction worker stands on a 'cherry picker' at a housing development project in south London August 6, 2013. REUTERS/Andrew Winning

A construction worker stands on a 'cherry picker' at a housing development project in south London August 6, 2013.

Credit: Reuters/Andrew Winning

Related Topics

LONDON (Reuters) - British workers are producing considerably less per hour than the average worker in other major economies, resulting in the biggest productivity gap for two decades.

Official data on Wednesday showed that output per hour worked in Britain last year was 16 percentage points below the average of other G7 industrialised countries.

A breakdown by country shows British productivity was 29 percentage points below that of the United States, 24 percentage points below that of Germany and France, and marginally below that of Canada and Italy. Only one nation - Japan - scored worse.

The findings highlight the unusual behaviour of Britain's labour market since the financial crisis. In contrast to the recession of the early 1980s when firms shed workers and unemployment soared, since 2007 companies have been reluctant to reduce headcount and workers have accepted below-inflation wage rises.

This so-called 'productivity puzzle' has big implications for the guidance the Bank has given on the future path of interest rates.

The BoE has pledged not to raise borrowing costs before unemployment has fallen to 7 percent - something it does not think is likely to happen before 2016 as it expects existing workers to become more productive before new ones are hired.

However, some economists say Britain's productivity took a permanent hit because of the recession, and reckon unemployment will fall faster.

"The extent to which the weakness in the UK's productivity has been structural rather than cyclical has vital implications for the economy's growth potential and for policy," said Howard Archer at IHS Global Insight.

(Reporting by Christina Fincher Editing by Jeremy Gaunt)

FILED UNDER:
We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (2)
Raymond.Vermont wrote:
Britain’s productivity gap with G7 peers widest in 20 years…

Britain has three and half countries incorporated into it, (England, Scotland, Wales and Northern Ireland) would removing one, two or three countries within that mix improve things for the major most manufacturing one?

Sep 18, 2013 2:50pm BST  --  Report as abuse
Raymond.Vermont wrote:
Productivity is the real value of output produced by a unit of labor in a unit of time. It is used to measure efficiency of the economy. The indicator varies across different countries. In most cases refers to GDP produced per employed person. It can also measure output per worker, output per filled job and output per hour worked.

ONS figs show UK productivity at 99.5 Index points.

U.S Productivity at 105.74
EU Area Productivity at 103.6
Japan Productivity at 95.0
German Productivity at 102.6
French Productivity at 99.5 (same as UK)
South Korea Productivity at 107.7

How Reuters can publish such inaccurate information, regarding the UK being 29% below U.S, and 24% below Germany and French figures, is further evidence that something is very wrong with the editing and that Reuters is not a reliable source of information!

Sep 18, 2013 3:04pm BST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.