UK productivity drops at fastest rate since records began

Official figures show the impact of millions of people stopping working during lockdown, and reveal furlough rates for different sectors

Productivity fell at its fastest rate since records began during lockdown, official figures show, as millions of people stopped working and economic activity dropped.

Labour productivity, measured by output per hour, fell by 2.5 per cent between April and June, according to the Office for National Statistics (ONS). This was a two-fold decrease in productivity compared to the 1.3 per cent fall recorded in the first three months of the year, and it was the sharpest fall in productivity since records began in 1991. 

During the same period, output per worker – measured as the total output divided by the number of workers employed – fell to -22 per cent: a drop of 19.9 per cent compared to the first quarter of 2020 (-3.1 per cent). The ONS said the large disparity between the output per hour and output per worker figures was largely because of the government’s furlough scheme, which left millions of workers employed and on payrolls but working zero hours.

Jonathan Athow, deputy national statistician and director general for economic statistics at the ONS, said the UK saw its largest fall in productivity since the 1970s, when the UK government introduced a three-day working week because of shortages in the supply of electricity.

The ONS also published a flash estimate of output per hour by industry. It found every sector in the UK economy experienced a quarter-on-quarter fall, with the largest drop in construction, at -11.4 per cent between April and June. This was driven by a 26.6 per cent drop in the number of hours worked in this sector. 

The services sector saw a 2.5 per cent decrease in output per hour, and manufacturing the smallest decrease at 0.3 per cent. 

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There were some industries where output per hour increased, however. The water supply industry experienced a 14 per cent increase between April and June – the largest recorded increase in output per hour for this industry – while computer, electronic and optical and electrical products manufacturing saw a 9.9 per cent increase.

The ONS also released new data on furlough rates in different sectors. Between 13 and 26 July, the entertainment and recreation sector had the largest proportion of its workforce furloughed, at 46 per cent. However, it was also the sector with the largest reported proportion of the workforce returning from furlough during the same period, at 25 per cent.

The accommodation and food services sector reported that a third (31 per cent) of its workforce remained furloughed during this period. Between 13 and 26 July, this sector also saw 17 per cent of its workforce return from furlough. 

Water supply, sewerage, waste management and remediation had the lowest proportion of workers furloughed at 1.8 per cent.

According to government figures, the furlough scheme has so far supported 9.6 million jobs since it was launched. However, the Resolution Foundation suggested that half of the workers who had been on the scheme could be back at work already, and the actual number of people on furlough as of the beginning of August was likely to be below 4.5 million – potentially as low as 3 million. 

As of this month, employers have been required to start making national insurance contributions for furloughed workers as part of the tapering of the scheme, which is set to finish at the end of October.