Labour productivity in the UK, as measured by output per hour, grew by 0.4% in Q3 2016 when compared with Q2, according to new data released by the Office of National Statistics (ONS).

The third quarter covers the period from July to September 2016 for the whole economy and a range of industries, together with estimates of unit labour costs. The ONS says that productivity is important as it is arguably the most important determinant of long-run improvements in average living standards. 

Productivity grew in the services industries but not in the manufacturing industries. Services productivity is estimated to have grown by 0.3% on the previous quarter, while manufacturing productivity is estimated to have fallen by 0.2% on the previous quarter.

Meanwhile, earnings and other labour costs growth outpaced productivity growth, resulting in unit labour cost (ULC) growth of 2.3% in the year to Quarter 3 2016. Unit labour costs reflect the full labour costs, including social security and employers’ pension contributions, incurred in the production of a unit of economic output.

”These estimates of productivity show that while labour productivity is improving, particularly in the services sector, it is still weak compared to that experienced in the recent past, both in terms of the level of productivity and the rate of growth. ONS is continuing to explore potential reasons for this,” Richard Heys, Deputy Chief Economist, ONS, said.