This year has been quite the economic rollercoaster. Last year we saw increases in employment and in productivity, but in 2018 we’ve already seen a downward trend.
Recent information from the Office of National Statistics shows that UK worker productivity in the last quarter of 2017 rose by 0.6%. Unfortunately, the first quarter of 2018 then saw a drop of 0.4%.
Although this is 0.9% higher than the previous year, it’s still 17.5% below its pre-downturn trend. But why exactly has this happened?
Blame It On Brexit
As with most things these days, the issues arising from a drop in productivity appears to be due to less confidence in Brexit and ongoing worries of UK growth.
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“Employment may have been lifted in recent times by some UK companies being keen to take on workers – or at least hold on to them – given concerns over labour shortages in some sectors and reports of fewer EU workers coming to the UK since the 2016 Brexit vote.” – Howard Archer, chief economic adviser to the EY ITEM Club.
Stronger UK Employment
Although Brexit certainly plays a part in the drop in productivity for the UK, stronger employment rates are also affecting these results.
The UK’s employment rate rose by 0.4 points to 75.6% in Q1 2018, the highest since modern records began in 1971.
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When more people contribute to the economy without generating greater levels of economic output, productivity falls. But economists believe that there is not enough being invested into skills needed for higher paid jobs, leaving us with hundreds of thousands of low-paid jobs.
“We’re hiring more people than ever, yet each worker is unable to produce much more. This means businesses cannot offer inflation-beating wages and that our long-term economic growth potential remains constrained.” – Tej Parikh, a senior economist at the Institute of Directors.
Uncertainty From UK Businesses
With the ongoing business of Brexit, it seems that many businesses are still uncertain about growth and investment in 2018. Many are putting decisions on hold until we have a clearer picture, which is hampering productivity.
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In turn, this is then demotivating the workers. Just 2 years ago, in 2016, output per British worker lagged behind every G7 country except Japan.
There is also a theory that under-skilled managers could be to blame. The Office of National Statistics scored UK manufacturing and service companies on their management prowess.
Their survey found that just increasing the score by 0.1% could result in a near 10% increase in productivity.
Unhappy Unengaged Workers
Above all else, one of the biggest contributing factor to a drop in UK productivity is workers not feeling appreciated and putting in less effort.
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Uncertainty with Brexit means that more and more workers are at risk of losing their jobs, especially with the demise of the high street. This then leads to employee stress, which in turn can lead to both sleep deprivation and the beginning of mental health issues.
Managers are also not engaging their employees or giving them positive reinforcement or motivation. Why work hard for someone who doesn’t care about you or your wellbeing?
All in all, there are dozens of factors affecting UK productivity levels. One thing is for sure, if we keep going in the same direction… the economy as a whole will suffer greatly.
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