Britain’s productivity crisis since the financial crash has been less deep than previously feared, the Office for National Statistics said, announcing big revisions to its economic analysis, led by growth in the telecoms sector.
The ONS on Monday increased its estimates of real gross domestic product growth between 2010 and 2019, but found that the economy grew less than thought between 1998 and 2007.
As a result, the size of the “productivity puzzle”, or the slowdown in growth in output per hour worker, was smaller than earlier estimates, said Josh Martin, statistician at the ONS.
According to previous figures, all advanced economies suffered a slowdown in productivity growth after the financial crisis, with the UK worst affected, raising concerns over the long-term growth of the country’s economy and public finances.
However, growth in the telecommunications sector between 1997 and 2018 “dramatically” surpassed earlier expectations, with productivity growth rates revised to 25 per cent per year, up from 5.7 per cent for that period. While the slow down in growth between the period before the financial crisis and afterwards was revised down.
Matthew Evans, director of markets at the tech trade association TechUK, said the figures “demonstrate the improvements the UK’s telecoms industry has made”.
He added that “ensuring the future rollout out of full fibre and 5G will be vital to a digital-led recovery from the pandemic and ensure future resilience in the UK economy”.
The updated ONS calculations, which will be implemented in official figures in autumn, were based on better estimates of telecoms prices, which reflected the rapid change in quality improvements across the sector.
Data showed “the rapid technological progress in this industry over the past two decades”, it said.
The revised calculation challenged previous studies that had identified the telecommunications industry as a large contributor to a slowdown in UK productivity growth.
The performance of the management consultancy sector was also revised up. Tamzen Isacsson, chief executive of the Management Consultancies Association, said it reflected the trend towards digital technologies over the past decade.
“In the last year, the shift to remote working has yielded further benefits in terms of productivity in our work, with unnecessary travel reduced as clients have recognised consultants can deliver successful results virtually,” she said.
The slowdown in productivity in the financial services industry after 2009 was still “a feature of the new data”.
Average annual GDP growth between 1998-2007 was 2.7 per cent, down from previous estimates of 2.9 per cent, according to the ONS. But between 2010-2019 it was revised up 0.1 percentage points up to 2.0 per cent.
The new data were calculated using a “double deflation method” instead of the current single deflation method, which takes separate account of the differing price and volume movements of input and outputs in an industry’s production process.
Bart van Ark, managing director of The Productivity Institute, a research organisation, said the changes to the method of calculation were “a good thing” and “long overdue”.
The ONS noted that despite the UK productivity puzzle being less severe than previously thought it was “still present” in the revised data.
Source: Economy - ft.com
