UK experiences worst productivity drop since 1970s

Productivity in the UK witnessed its largest drop since the 1970s when the country implemented a three-day work week due to the shortages in the supply of electricity.

According to the Office for National Statistics (ONS), output per hour fell by 2.5 per cent between April and June. With the start of 2020 seeing a productivity drop of 1.3 per cent during Q1of the year. This the sharpest fall in productivity since 1991.

Output per worker, which is measured by total output per hour divided by the number of workers employed dropped to -22 per cent. This is a decrease of 19.9 per cent compared to Q1 of 2020 when it was -3.1 per cent. The ONS believes the reason for the big difference between output per hour and output per worker is mainly due to the Government’s furlough system, as over 9 million employees are on the scheme in which they are paid 80 per cent of their salary for not actually working.

The ONS figures also show that nearly all sectors witnessed a quarter-on-quarter drop in productivity. The construction industry saw the biggest drop of 11.4 per cent between April and June. This number was aided by a 26.6 per cent drop in the number of hours worked in the sector. The services industry output per hour fell by only 2.5 per cent and the manufacturing industry fell by 0.3 per cent, the smallest industry drop.

However, the water supply industry enjoyed a 14 per cent increase, as well as computer, electronic, optical and electrical products manufacturing which saw a 9.9 per cent increase.

In January 2020, HRreview reported research conducted by OrgVue, found that only 40 per cent of people in HR and finance have a collaborative relationship. Despite, 84 per cent of business leaders saying that better collaboration between finance and HR would improve their ability to plan and execute their strategy. OrgVue believes as long as there is a disconnection between the two departments, the UK’s low productivity will remain an issue.

OrgVue believes what makes the two departments ideal for collaboration is that “finance teams have large amounts of data on workforce costs or sales, while HR teams are more likely to collect information on an employee’s well-being, relationships with other colleagues and skills sets.”

A separate report conducted by OrgVue found that if companies deployed human capital effectively, the business could create a 50 per cent productivity increase at the UK’s largest companies. This was shown to translate to an overall increase in the gross domestic product (GDP) of £10.4 billion.

Rupert Morrison, CEO of OrgVue, said:

Organisations used to be simple structures, but now they’re hugely complex. You can either ignore that and put your head in the sand, or tackle the complexity head on.

Businesses will need to move even faster and be more dynamic in the future than they are right now. That’s why having the agility to capitalise on opportunities by deploying your talent quickly and effectively is absolutely crucial. Right now, the vast majority of businesses have very little data on their people. What’s needed is an overall picture of skills and competencies, the work, and the organisation’s objectives to create a well functioning model that’s driven by data and delivered by humans.