IoD: ‘Subpar productivity growth a bugbear for the UK economy’

Responding to official figures showing that quarterly labour productivity growth increased by 0.5% in Q2, Tej Parikh, Senior Economist at the Institute of Directors, said:

“Despite the recent uptick, subpar productivity growth continues to be a bugbear for the UK economy.

“On the one hand, the labour market is booming with a near record number of people in jobs, but on the other hand we’re struggling to increase our end-product. This story of growing employment without a significant pick-up in output has come to define our economy over the past decade, with weak wage growth being a key outcome.

“Uncertainty has played its part in subduing the investment that could drive productivity, but more impetus needs to return to the domestic economic policy agenda. The Chancellor’s announcements to boost skills and business mentoring at the Conservative Party Conference was a step in the right direction, but there’s more work to be done.

“Closing the gap between our leading firms and SMEs is a quick win, and the forthcoming Budget is the opportune moment for supportive policies. Until smaller businesses get the support to scale-up and invest in established technologies, the productivity challenge, and weak pick-up in wages, will likely linger on.”