Friday 18 November 2022

Weak productivity growth reinforces need for investment in technology

quarterly output per hour workedThere was much coverage last week of the UK's poor GDP performance. But there is still not enough discussion on this chart: productivity, measured by output per hour worked.

Figures from the Office for National Statistics this week reinforce a trend of weak productivity growth, which has hampered the UK economy since the end of the credit crunch over a decade ago. It is visible in the change in the slope of the line from 2009 onwards.

It's important to be clear why we care about productivity. Increasing productivity does not mean working longer hours. Rather, it means we get more output from every hour worked. That means the material wealth of the nation rises. In other words, greater productivity raises living standards.

gdp per capitaDirect international productivity comparisons are challenging due to different data measurement techniques. But it is clear that the UK economy hasn't performed as well as many of its peers since the credit crunch. The second chart shows GDP per capita of the UK against the US, in current dollar terms. The divergence after the credit crunch is clear - and much of the shortfall in the UK's GDP per capita performance can be traced back to the weaker productivity growth visible in the first chart.

So how do we make each hour of work more productive? Investments in technology and in the people who use it are a big part of the solution. And TechMarketView will be covering this crucial topic throughout the coming year.

See our overview of the trends we think will be important in ICT as the UK economy seeks to kickstart growth through increased productivity and watch out for our detailed coverage of these areas.

Posted by Tania Wilson at '07:00' - Tagged: productivity   macro