UK productivity rises slightly in Q3 2019 year on year

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UK productivity rises slightly in Q3 2019 year on year

After four consecutive quarters of the UK’s productivity contracting, the third quarter of 2019 saw it rise slightly in comparison to the same period in 2018.

This is according to the Office for National Statistics (ONS), which reported that output per hour worked rose by 0.1 per cent in quarter three compared to the previous year.

Productivity levels in the UK have not been able to reach its average level it held between 1972 and the financial crisis in 2008.

Also, earnings growth is greater than output which has led to an increase in the cost of labour by 3.6 per cent.

Sajid Javid, Chancellor of the Exchequer has said he plans to address the UK’s low productivity in his March 11th budget, along with an increase in infrastructure investment.

Unily, an intranet provider found that 79 per cent of businesses believe the main hurdles to productivity within a business are culture and technological uptake. Over half (54 per cent) believe productivity increases in the workplace when using new digital tools.

Joanne Skilton, chief commercial officer at Unily, said:

Productivity continues to be an issue of critical importance to businesses and is a crucial signifier of business health. In order to create rhythm within a team, the beginning of the year is a good time for businesses to think about their digital use and how it can be better incorporated into their day-to-day.

Katherine Kent, a statistician  at the ONS said:

Although productivity grew on the year, the underlying picture is of sustained weakness since 2008, with growth over the past year being only a third of the average over the last 10 years or so.

Gerwyn Davies, senior labour market adviser at the CIPD, said:

These latest figures offer further evidence that stronger earnings growth isn’t encouraging employers to invest in higher levels of productivity.

Political uncertainty may have cast a shadow over some UK businesses’ confidence levels and held them back from investing over the recent past.  However, with some of that uncertainty now removed, employers should be looking to improve output through greater investment in skills and technology, and not through intensifying work.

The introduction of new migration restrictions alongside another generous uprating in the National Living Wage later this year are compelling reasons for employers to make this a priority. A failure to do this may result in job cuts in some cases. And while the government’s commitment to increasing investment in infrastructure is welcome, more business support is needed for small firms to help them make the right investment, particularly in how they manage and develop their staff.

Matt Weston, managing director at Robert Half UK believes these results will just exacerbate the “war for talent”. Mr Weston said:

The war for talent shows no sign of slowing down in 2020 and employers can expect to be at the receiving end of promotion and pay rise requests while top professionals will be fielding multiple job offers.

In order to win the war for talent, employers will need to consider a flexible hiring strategy, looking at both permanent and temporary staff to bring a range of skills and experience to the team and help tackle any productivity challenges. The onus is also on employers to provide a competitive remuneration package that is attractive to staff. That said, employees are also receptive to other benefits such as flexible working, health and wellbeing perks and training opportunities, all of which should be considered as part of any offer to retain or attract a talented team.

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