Uncertainties in productivity scenario poses problems for British economy

The recent weakness in productivity figures in Britain has caught attention, and people are trying to figure out what might be the problem and its implications for the British economy. In the third quarter this year, output per worker was up 0.7 percent year-on-year, but it had slipped behind the previous quarters' growth, rising just 0.1 percent quarter-on-quarter, after increases of 0.6 percent in Q2 and 0.7 percent in Q1. At face value, the Q3 2013 performance is not encouraging for hopes that much of the recent weakness in productivity has been cyclical and productivity can improve appreciably as the economy recovers, said Dr Howard Archer, chief British and European economist with IHS Global Insight. He said, "The true picture on productivity is unlikely to emerge until the UK has seen a prolonged period of decent growth." Archer said there was debate and uncertainty over how much of the poor productivity performance since the 2008/9 downturn is due to cyclical factors, and therefore likely to be temporary, and how much is due to structural factors and therefore likely to be long-lasting or permanent. Archer said, "The extent to which the weakness in the UK's productivity has been structural rather than cyclical has vital implications for the economy's growth potential and for policy."