UK productivity picks up in Q2, boosted by manufacturing

Productivity increased in the UK in the second quarter of the year as companies, particularly in the manufacturing sector, appeared to deal easily with the higher demand evident in the economy's above-trend performance, official figures showed today. The office for National Statistics said output per worker increased by 1.8 pct in the second quarter, compared with a year ago, up from 1.5 pct in the first. The second quarter performance was the best since the third quarter of 2004. The statistics office added that quarter-on-quarter, output per worker rose by 0.6 pct, up from the 0.2 pct recorded in the first quarter. A more detailed look a the data showed that manufacturing productivity was 3.5 pct up on the previous year, against 2.7 pct in the previous quarter. "The improvement in productivity was particularly pronounced in the manufacturing sector, reflecting the sector's recently improved output as well as companies' efforts to boost competitiveness by keeping their labour forces as tight as possible," said Howard Archer, chief UK economist at Global Insight. "The overall improvement in UK annual productivity growth in the first half of this year is welcome news, although it is clear that the recent swings in productivity have been significantly influenced by developments in output," he added. Overall though, he said the UK's productivity performance remains relatively disappointing and cited a number of factors to explain this, including relatively limited business investment in recent years, low research & development expenditure, the diversion of resources to the public sector in recent years, infrastructure bottlenecks, and education inefficiencies. In addition, he noted that the high level of employment in the UK means that less productive workers are also able to get jobs, which reduces overall productivity. Meanwhile, the statistics office said unit wage costs for the whole economy rose by 2.0 pct in the second quarter compared with the same quarter a year ago, down from 2.2 pct in the first three months of the year. Quarter-on-quarter, it said unit wage costs rose by 0.1 pct, down from the 0.7 pct recorded in the previous quarter