Growth in UK productivity stalls as manufacturing tails off sharply

The productivity of British workers slumped over the summer as labour costs surged at the same time as the economy slowed, official figures showed.

The productivity of British workers slumped over the summer as labour costs surged at the same time as the economy slowed, official figures showed.

Each British worker produced just 1.6 per cent more between April and June than in the same quarter last year, the smallest annual increase since the last three months of 1999 and down from 2.1 per cent in the first quarter. National Statistics, the government's data collectors, said: "There has been a slowdown in productivity growth following the period of improvement that began in the middle of 1999. This will come as a setback for the Treasury's aim to boost the UK's poor record on productivity, which it last year pledged to achieve in this Parliament. NS said the key factor behind the drop was a sharp fall in manufacturing output – currently in its worst state for a decade.

Manufacturing productivity grew 2.5 per cent – its lowest for two years – in the second quarter from a year earlier, down sharply from 5.3 per cent in the first quarter. Between the first and second quarters of 2001 manufacturing productivity fell by 1.2 per cent – its first fall for four years. The slower growth and hesitancy about cutting too many jobs pushed up unit wage costs following an improvement that began in the middle of 1999. Unit wage costs increased 3.5 per cent compared with a year ago, up from 2.5 per cent in the first quarter.

Figures also showed investment in manufacturing fell 0.7 per cent in the second quarter while construction spending tumbled by 18 per cent. A 25 per cent surge in government spending contributed to a 2.5 per cent rise in total investment.