April 5, 2017 / 9:00 AM / 4 months ago

UK productivity grows at fastest rate since mid-2015 - ONS

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Construction workers carry steel meshing at the site for the new Crossrail station in Tottenham Court Road, in London, Britain, November 16, 2016.Stefan Wermuth

LONDON (Reuters) - The productivity of Britain's workforce grew at its fastest rate in more than a year in the final three months of 2016, though it remained lacklustre compared with before the financial crisis, official data showed on Wednesday.

British labour productivity has long lagged behind that in the United States, Germany and France, depressing wage growth and raising questions about the country's competitiveness as it prepares to leave the European Union.

There was a modest improvement in the last quarter of 2016, when economic output per hour worked rose by 0.4 percent, picking up from a one-year low of 0.2 percent in the previous three-month period, the Office for National Statistics said.

Compared with a year earlier, productivity rose by 1.2 percent, the fastest growth since the second quarter of 2015, after falling year-on-year in the three months to September.

"Quarterly growth (in output per hour) of 0.4 percent is below the 1994 to 2007 average - which even taken together with recent stronger quarters, provides little sign of an end to the UK's 'productivity puzzle'," the ONS said.

Productivity is just 1.1 percent above its peak before Britain entered recession in early 2008.

Workers cross Westminster Bridge during the morning rush hour in London in Britain, November 28, 2016.Toby Melville

One factor behind Britain's weak productivity record has been a mix of strong job creation - which has led to a record number of people in work, though often in low-skilled roles - but more modest growth in output.

In the three months to December there was a partial reversal of this pattern. The number of people in work rose by 37,000 - well below its average in recent years - while the economy grew by 0.7 percent, comfortably above average.

It is unclear if productivity will continue to improve.

An increase in Britain's minimum wage in April should push employers to get more out of their workers, but the scope for gains may be limited in the low-skilled sectors that have grown strongly since the financial crisis.

Moreover, productivity gains often require significant investment in staff training and equipment. Businesses might be reluctant to do so given uncertainty about Britain's economic prospects once it leaves the EU in under two years' time, said Howard Archer, an economist at IHS Markit.

"This could be compounded if foreign companies markedly reduce their investment in the UK and this dilutes any beneficial spillover of skills and knowledge," Archer said.

Editing by William Schomberg and Angus MacSwan

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