Britain’s productivity has fallen at the fastest annual pace in five years in a sign that Brexit uncertainty is compounding an already weak spot in the UK economy.
Official figures showed that output per hour worked fell 0.5% year-on-year between April and June – the biggest drop since the second quarter of 2014.
Productivity fell 0.2% quarter-on-quarter, according to the Office for National Statistics (ONS).
The drop in year-on-year productivity in the labour market follows two previous quarters of zero growth.
Labour productivity in Q2 2019 was down by 0.5%, compared with the same quarter for 2018.
— Office for National Statistics (@ONS) October 8, 2019
It comes after years of below-par productivity – leading to the so-called “productivity puzzle” seen in the UK economy since the 2008 financial crisis and following recession.
Richard Heys, deputy chief economist at the ONS, said: “Labour productivity has continued the weak trajectory it has followed over the last year.
“Both manufacturing and services saw a fall on this time last year, with only a couple of other relatively small sectors contributing positively.
“This confirms the broad base of the UK’s productivity challenges.”
The ONS figures showed the dominant services sector, which accounts for around three quarters of UK economic output, saw a 0.8% fall year-on-year in productivity, while manufacturing suffered a 1.9% drop.
Experts said the data suggests another area where Brexit uncertainty has taken its toll.
There are also cracks appearing in the wider employment market, with two major recruiters on Tuesday – PageGroup and Robert Walters – warning over the impact of Brexit on the UK jobs sector.
Howard Archer, chief economic adviser to the EY ITEM Club, said: “Heightened concerns over Brexit – especially serious concerns among many companies of the UK leaving the EU without a ‘deal’ at the end of October – has clearly caused companies to limit their investment with damaging implications for productivity.”
Business investment fell again between April to June – marking declines in five out of the six last quarters.
Jon Boys, labour market economist at the CIPD, the professional body for HR and people development, said: “Though we talk of a productivity puzzle, there is an obvious culprit and that’s uncertainty.
“Government needs to reduce uncertainty, so businesses aren’t deterred from investing for the future.”