Covid-19 clatters Britain’s productivity

The furlough scheme was backdated to the beginning of March by Chancellor Rishi Sunak when it was introduced, with taxpayers paying 80pc of the wages of millions of workers, creating a major dent to productivity. Measured by output per hour, the blow was less severe – down 0.6pc – as the number of hours worked fell 1.2pc, albeit still less steeply than the decline in GVA. Paying workers to do nothing also pushed unit labour costs – the cost of producing a unit of output – up 6.2pc, the biggest annual rise since 2006. 

The desperate hunt for a Covid-19 vaccine is also reflected in the figures. While overall output per hour among manufacturing firms sank 0.6pc compared to the end of 2019, the chemicals and pharmaceuticals sector stands out with a staggering 11.9pc rise over the first quarter of the year. 

Pablo Shah, UK economist at the Centre for Economics and Business Research, said: “A primary driver of this result will have been the coronavirus pandemic, and the global scramble for medical equipment, drugs and treatments.”

Among services sector workers the pain was much more pronounced as output per worker in food and accommodation businesses plunged 12.3pc compared to the previous quarter. 

Output in “real estate activities” meanwhile sank 6.3pc, as the property market effectively shut down in mid-March.

Despite a surge in health spending, productivity in public services sank 4.8pc year on year as well, because schools were closed and the extra outlays on health were also met by the cutting back of GP appointments, the rapid scaling back of non-emergency surgery, as well as cancelled or postponed outpatient activity. 

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