April 1, 2014 / 2:32 PM / 3 years ago

Weak British productivity ticks up at the end of 2013

Workers pack bricks at the Wienerberger Brick Factory in Dosthill, central England August 8, 2013. REUTERS/Darren Staples

LONDON (Reuters) - Britain’s productivity returned to modest growth towards the end of last year, raising hopes that 2014 will bring an end to years of bafflingly low levels of output that have hindered the economic recovery.

Productivity on an output-per-hour basis was up 0.3 percent from October through December, reversing a 0.2 percent drop in the third quarter, and rose 0.7 percent on the year-ago period, the Office for National Statistics (ONS) said on Tuesday.

Output per hour in Britain was 21 percentage points below the average for the rest of the Group of Seven industrialized economies in 2012, the widest productivity gap since 1992, the ONS said in February.

Figuring out why Britain’s workers have produced much less per hour than those in other major economies has been a big question mark hanging over the economic recovery, especially for Bank of England officials trying to set monetary policy.

Analysts said Tuesday’s data provided some tentative signs that productivity may be about to rise more quickly.

“Our view is that there is a substantial cyclical element in the weakness of productivity and it is likely to improve markedly as the economy picks up,” Howard Archer, chief economist at IHS Global Insight, said.

“We suspect that there is appreciable scope for many companies to ultimately make more use of their existing workforce,” he said.

Geraint Johnes, Work Foundation think-tank director, said the productivity rate remains below half its long-term trend.

“Stronger overall productivity growth will require renewed investment in the skills of the British workforce, making up ground lost during the years since recession,” he said.

The ONS said output per hour in 2013 was more than 3 percentage points lower than in 2008, before Britain’s worst post-war recession.

The BoE is concerned that low productivity may limit Britain’s ability to make up for lost output without generating higher inflation in the medium term.

But its governor Mark Carney said last month productivity may be moving towards its long-term trend.

“The most recent figures on productivity suggest around a 2 percent annualized growth rate, which is coming for the first time in a very long time towards trend,” he told parliament.

Editing by Louise Ireland

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