Each UK worker produced 0.8% more output in Q1 2024 than the same period one year ago, equivalent to £149 each. However, this was only possible because the average employee worked an additional 2.9 hours, according to Cebr calculations based on flash estimates from the ONS released last week.

This means that productivity has essentially flatlined in the past year when looking at the preferred output per hour measure, increasing by just 0.1%, meaning the average worker is barely more efficient than a year ago.

Productivity, despite being less widely followed or understood than other economic variables like GDP, is the most important metric over the long term. This is because, over the long term, productivity is the main driver of living standards. Simply, if you produce more, you will earn more and be able to consume more.

Over the past year, workers could only produce more by working longer hours. This is clearly an unsustainable way to improve productivity. Although the average time worked in the UK was around 200 hours lower per year than the average OECD country in 2022, it is already ahead of many European counterparts such as Germany, France, Netherlands and Denmark.

Delving into the more detailed data for Q4 2023, the industry with the worst productivity performance over the past year was business services, which saw a 6.5% decline in output per hour. This starkly contrasted with manufacturing workers, who saw a 4.0% increase in productivity over the same period.

It’s currently unclear what would be driving such poor performance within services firms. Fundamentally, there is a greater level of uncertainty regarding productivity measurement amongst services firms compared to manufacturers. One reason for this is that a services firm might decide to invest more time into an activity that doesn’t immediately boost output, such as product development. However, this tends not to show up in official investment statistics, which are more geared towards capital investment.   

It could also be the case that changing working patterns are playing a role. Indeed, the average time spent in the office in 2023 was 1.8 days, according to Advanced Workplace Associates, down from 3.8 before the pandemic, although news reports suggest many firms are now either encouraging or mandating a higher level of home working.

The overall impact of home-working on productivity is unclear. People have their own, often entrenched, positions on the subject, and it is likely highly variable between individuals. Working from home offers no commute time and fewer distractions from colleagues, but also less monitoring and, therefore, a greater opportunity for presenteeism.

However, there are also many potential impacts to long-term productivity growth from excessive home-working. Less face-to-face interaction with colleagues can lead to less social cohesion, which can impact motivation and attrition. It can also reduce opportunities to learn and develop through osmosis and build new ideas through water cooler conversations.

Whatever the reason for the recent slowdown in productivity, taking a longer-term view reveals that productivity has largely grown at a consistent pace since 2009. The issue is that this pace is remarkably slow, at around 0.8% a year. If the UK is to make real inroads in improving people’s standard of living, the productivity problem must be solved. This should be a top priority for whoever wins the next election.

For more information contact:

Christopher Breen, Head of Economic Insight
Email: cbreen@cebr.com Phone: 020 7324 2866

Cebr is an independent London-based economic consultancy specialising in economic impact assessment, macroeconomic forecasting and thought leadership. For more information on this report, or if you are interested in commissioning research with Cebr, please contact us using our enquiries page.