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The UK and NI productivity problems

In recent years we have become used to statements about the UK’s “productivity problem". Specifically, that productivity growth has been unusually low since the onset of the 2007-9 recession and also that the level of output per worker (or per working hour) in the UK is now considerably lower than that in many other Western economies such as the US, France and Germany.

Figures published by the Office for National Statistics (ONS) on Wednesday (5 July) imply that this productivity problem, or puzzle, may be getting worse. In fact, for the overall UK economy output per hour worked was actually lower in the first Quarter of 2017 than it was in the final Quarter of 2016; a decline of 0.5%. That reduction implied that the level of output per hour in January-March 2017 was slightly lower than that achieved at the end of 2007. An economy where levels of output per working hour are basically stagnant is unlikely to be one which can generate the sorts of increases in wages and living standards which we have hitherto hoped for.

But, what of Northern Ireland’s (NI) regional productivity performance? Unfortunately, ONS do not supply regional productivity results beyond 2015. What we do know from an earlier ONS publication (6 January 2017) is that NI’s productivity declined relative to the UK average during 2007-2015; from 82% to 80% when measured in terms of output per hour and from 87% to 84% in terms of output per worker (both measured in terms of gross value added and smoothing away year-on-year volatility).

What we have now learned from Wednesday’s figures is that NI’s comparative productivity has been declining across most of the 16 individual sectors where ONS made comparisons in 2007 and 2015; declining in nine of those sectors as the Table below illustrates:

Table: Sectors where NI’s comparative GVA per hour fell during 2007-15

(UK average level= 100)

2007

2015

Construction

86.8

70.9

Transport

90.0

88.1

Information & Communication

81.3

69.6

Real estate activities

136.0

81.3

Professional, scientific and technical services

100.9

74.5

Admin & support services

79.8

74.0

Education

103.6

99.2

Arts, entertainment & recreation

100.7

72.0

Other

99.8

72.0

Admittedly, between 2007 and 2015 NI’s productivity improved relative to the UK in important sectors such as manufacturing, health care and finance but in 2015 there was only one sector, public administration, where the NI level of GVA per hour was higher than the UK average.

We still have no Executive or Budget or Programme for Government in place, and as many people are about to go off at the start of the holiday season there is room for serious reflection about why our output per time worked is still relatively low.

Notes:

Most of this data is taken from ONS 5 July 2017, “UK Productivity: January to March 2017”, and, “Introducing industry-by-region labour metrics and productivity: July 2017”.

Note, that ONS are using a new method combining the Annual Survey of Hours and Earnings and the Labour Force Survey to estimate total hours worked so some of the results may be subject to revision.