Brexit uncertainty blamed as productivity falls

Uncertainty over Brexit has been blamed after UK productivity fell at its fastest pace in five years.

The Office for National Statistics announced yesterday that labour productivity fell by 0.5% in the three months to June compared with the same quarter last year, the worst performance since mid-2014.

The figures showed a 0.2% dip on a quarter-on-quarter basis, following on the heels of two consecutive quarters of zero growth.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

Tej Parikh, the chief economist at the Institute of Directors, told The Guardian that the figures “hammer home the impact uncertainty is having on the business environment”.

Howard Archer, the chief economic adviser to the EY Item Club, said the data “does not make for happy reading”, adding that “if the UK leaves the EU without a deal on 31 October, business investment is likely to suffer markedly, with worrying implications for productivity”.

The news is therefore doubly uncomfortable for Boris Johnson, who placed productivity at the heart of his speech to the Conservative party conference last week, saying: “With infrastructure, education and technology we will drive up the productivity of this country and bring it together.”

However, this is easier said than done. Sky News explains that “solving the so-called productivity puzzle has proved a tough nut to crack since an emphasis on bolstering output was identified as a priority in the wake of the financial crisis”.

Labour seized on the news, with shadow chancellor John McDonnell saying the latest data showed the Tories were “running the economy into the ground”.

“This damning indictment of the government’s record reflects not just its Brexit bungling but a failure to tackle long-term challenges in the economy,” he said.

–––––––––––––––––––––––––––––––For a round-up of the most important business stories and tips for the week’s best shares - try The Week magazine. Get your first six issues for £6–––––––––––––––––––––––––––––––