February 7, 2018 / 12:57 PM / 9 months ago

Growth in low-productivity work key to UK weakness, ONS says

FILE PHOTO - City workers are seen at their offices in the financial district of the City of London, Britain, January 7, 2016. REUTERS/Toby Melville/File Photo

LONDON (Reuters) - Britain’s weak productivity growth since the financial crisis owes more than previously thought to people becoming likelier to work in less productive industries, the country’s statistics agency said.

Last month the Office for National Statistics said that over the past 10 years productivity growth appeared to have been the slowest since the early 1820s, when Britain was emerging from the Napoleonic wars.

The exact cause of this slowdown is unclear. In part it reflects a longer-term slowdown in productivity growth that began before the financial crisis, as well as low investment afterwards, a lasting hit to financial-services profits and falling North Sea oil output.

Looking at more finely grained data on individual types of business than was available before, the ONS said changes in the shape of Britain’s economy played a bigger role than declining productivity within individual industries.

“Just over two thirds of the fall in productivity growth over this time can be attributed to the shifting composition of the UK economy, with the remaining one-third being attributable to changes in growth for particular industries,” it said.

Reduced labor mobility since the financial crisis has been an important reason for this. In the five years before the financial crisis, people changing jobs to work in more productive industries added about 1 to 2 percentage points to cumulative productive growth of 8 to 12 percent, the ONS said.

By contrast, since 2010 this effect has gone into reverse while overall productivity has barely grown, reflecting a reluctance of people to change jobs after the financial crisis.

Also weighing on the average productivity of the economy as a whole was a reduction in the size of sectors like financial services - where productivity is still above average - compared with less productive activities such as security, landscaping and recreational activities.

Reporting by David Milliken, editing by Larry King

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