The productivity of British workers fell at the fastest pace for five years in the second quarter of 2019, amid mounting concerns over the impact of Brexit uncertainty on the economy.
The Office for National Statistics said labour productivity – a measure of economic output per hour of work – slumped by 0.5% in the three months to June compared with the same period a year ago, the worst performance since mid-2014.
In a sign that the UK is continuing its dismal track record since the financial crisis, which economists believe has been exacerbated by the Brexit vote, the latest fall follows two consecutive quarters of zero growth.
The ONS said there was no growth in output per job in the second quarter, a period when job creation continued to deliver the highest employment levels on record but when the economy also contracted for the first time since 2012.
Economists believe improvement in productivity is vital for lifting economic growth and raising living standards.
Boris Johnson made productivity a central plank of his speech to the Conservative party conference in Manchester last week, saying: “With infrastructure, education and technology we will drive up the productivity of this country and bring it together.”
Theresa May had also placed productivity at the heart of her agenda, with it forming the backbone of her government’s industrial strategy, although lobby groups and Labour have repeatedly warned that too little is being achieved.
John McDonnell, the shadow chancellor, said the latest snapshot showed the Conservatives were “running the economy into the ground”.
“This damning indictment of the government’s record reflects not just its Brexit bungling but a failure to tackle long-term challenges in the economy,” he said.
The findings from the ONS show how the UK has been held back by low productivity and investment since the financial crisis, and suggest the trend has been exacerbated since the EU referendum. Economists believe the vote to leave the EU and continuing uncertainty over the UK’s future trade relationships discouraged companies from investing in productivity-boosting technology.
Tej Parikh, the 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. Many companies are also trimming their investment pipelines for the year ahead to build up a cash cushion in anticipation of challenging economic conditions ahead.”
Without investment and improvements in productivity, say economists , near-term economic growth is likely to slow further and the prospects for increases in workers’ pay over the longer term could also fall.
Howard Archer, the chief economic adviser to the EY Item Club, said: “This does not make for happy reading. If the UK leaves the EU without a deal on 31 October, business investment is likely to suffer markedly, with worrying implications for productivity.”
A spokesperson for the Treasury said: “We are tackling the UK’s productivity challenge head on by investing record amounts – prioritising areas known to boost productivity such as housing and transport.”
