The productivity measure, which tracks how much output is produced for each hour worked, has failed to maintain the performance in the aftermath of the pandemic. This lags behind the trend between the 2008 financial crisis and COVID-19, marking the fourth consecutive quarter where productivity has languished below expected levels.
The transport and storage sector was a strong performer, achieving productivity growth of 11.2% compared to the previous year. This was driven by increased gross value added rather than reduced hours.
The wholesale and retail sector experienced the most significant decline, with productivity falling by 3.2%. This downturn reflects structural changes in the retail industry during the post-pandemic era as more consumers shopped online.
The ONS data shows a structural shift in the economy, with activity moving from higher productivity sectors to those with lower productivity levels. This ‘between-industry effect’ undermined productivity growth for the fourth consecutive quarter.
Unlike previous economic downturns, such as the 2008 financial crisis where productivity typically fell sharply, the pandemic initially sparked a rapid recovery in efficiency metrics. However, this was short-lived.
“The productivity puzzle continues to challenge policymakers,” said Professor Sarah Thompson, an economist at the London School of Economics. “While some sectors have demonstrated remarkable adaptability, the broader picture suggests we’re still struggling to unlock the key to sustained productivity growth across the whole economy.”
The manufacturing sector’s decline of 1.5% in productivity illustrates ongoing challenges in industrial efficiency, despite government initiatives to boost factory output and modernise production processes.
Mining and quarrying had an 8.5% productivity increase, though this was largely due to a reduction in hours worked rather than increased output.
The administrative services sector’s positive performance had a 4.2% productivity increase, indicating some sectors have adapted to new working patterns and technological innovations.
Economists warn the gap between actual productivity and pre-pandemic trends could impact wage growth and living standards over the long term.
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