Wages ‘would be £5,000 higher on average’ if productivity crisis were fixed

8 Jul 2019 By Francis Churchill

ONS suggests third consecutive quarterly drop in employee output is making workers and businesses poorer

Stagnant productivity growth may be costing UK workers an average of £5,000 a year, according to the Office for National Statistics (ONS).

Alongside its latest productivity figures, the ONS estimated that if the levels of productivity growth seen before the financial crash had continued, productivity rates would now be 14 per cent higher than they were in 2008. Instead, they are 4.5 per cent lower, which in turn has restricted wage growth.

The latest statistics also showed that in the first quarter of 2019, productivity dropped 0.2 per cent compared to the same period in 2018 – making it the third consecutive quarter of contraction.

Katherine Kent, head of productivity at the ONS, said the figures showed a continuation of the UK’s productivity problem, with rates remaining stubbornly stagnant despite the economy’s recovery from the crash.

“This sustained stagnation in productivity in the last decade is at odds with what we’ve seen after previous economic downturns,” said Kent.

“Our new analysis underlines the impact this has had on sluggish wage growth in recent years, with private sector workers missing out on an estimated average of £5,000 per year.”

The ONS analysis also suggested public sector productivity had also fallen 3.1 per cent in the last quarter, despite an increase in investment in the sector.

Paul Avis, marketing director at Canada Life, said the results came as little surprise. “The majority of advanced economies have experienced a slowdown in productivity growth since the 2007 financial crisis, becoming even more acute amid ongoing Brexit concerns and economic uncertainty in the UK,” he said.

Avis added: “If we are to pull ourselves up by our bootstraps and improve our productivity, we need to start with leadership.

“Our research shows that almost half of UK employees say their employer doesn’t understand how to improve productivity, and a sixth feel poor management and lack of recognition is having a negative impact on their work.”

Chris Marjara, CMO at the Access Group, singled out mid-market organisations as a productivity pinch point. “With scale comes complexity, and productivity appears to be suffering as organisations expand,” he said.

“It’s evident Britain needs a new way of thinking about productivity. This means casting aside siloed initiatives and adopting a more holistic, ‘people plus technology’ approach.”

The ONS also pointed to a slowdown in business investment, and said capital deepening – the increase in the amount of capital per worker – was weak by historic standards.

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