UK productivity falls in quarter to September ahead of furlough end

·Business Reporter, Yahoo Finance UK
·2-min read
Foundry workers pour molten iron into moulds at the Barr and Grosvenor foundry in Wolverhampton, England
Output per worker was 0.6% below pre-COVID levels, despite a rise of 0.3% in the period. Photo: Christopher Furlong/Getty Images

Productivity in the UK fell in the quarter to September as the government’s furlough scheme wound to an end.

New data from the Office for National Statistics (ONS) showed on Tuesday that output per hour worked declined by 1.4% quarter-on-quarter but was 1.1% above the average level before the pandemic in 2019.

Output per worker was 0.6% below pre-COVID levels, despite a rise of 0.3% in the period.

“The divergence between productivity measures affected by the furlough scheme is narrowing and could be expected to close further in the fourth quarter from October to December," the ONS said.

The job retention scheme had been winding down from July 2021, with companies having to pay more of their employee's wages than in previous months.

Initially the government supplied workers with 80% of their wages but the rule changes meant firms then contributed 10% of that from July, which rose to 20% in August. Furlough is estimated to have helped protect more than 11 million jobs since the start of the pandemic.

Read more: How end of furlough scheme will impact UK job market

The latest report also showed that public service productivity was 8.1% lower than the 2019 average level, while during the coronavirus pandemic growth in inputs of 18.6% outpaced growth in output of 8.9%.

Public service productivity increased by 0.6% in quarter 3, compared with the previous quarter, driven by the first fall in public service inputs since before the coronavirus pandemic started.

The move was driven by a small contraction in healthcare activities, while test and trace and vaccination activity continued and schools remained open.

Chart: ONS
Chart: ONS

Meanwhile, market sector hours worked increased in the latest quarter, whereas labour composition continued to decline from its peak in Q3.

This shift is because of lower skilled workers, who were most affected by furlough policies, working an increasing number of hours as the economy moves towards pre-coronavirus pandemic levels of hours worked, the ONS added.

Read more: Employers also need to embrace right to request flexible working

It comes after the government implemented a recent work from home order in a bid to curb the spread of Omicron infections sweeping the country.

Jane Gratton, head of people policy at the British Chambers of Commerce (BCC) said: “[Businesses] had a steep learning curve at first, but now firms have been forced to innovate quickly to find new ways of managing people. That investment and innovation has probably improved productivity in many ways."

On Tuesday ministers called on prime minister Boris Johnson to end the remote working guidance introduced by Plan B, which is due to expire on 26 January.

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