UK labour productivity rises at fastest pace in four years, ONS reveals

UK labour productivity in the second quarter rose at the fastest pace in four years, according to the Office for National Statistics on Thursday.

Productivity output per hour rose 0.9% in the second quarter from the first three months, as strong growth in the services industry offset manufacturing sector output.

The ONS said unit labour costs grew 2.2% on the same quarter last year, the fastest rate since the last quarter of 2012, reflecting an “upward shift in the costs of labour as reflected in earnings growth and wider indicators”.

“The recent loss of momentum in the labour market may well be a sign that UK productivity is now seeing genuine improvement - with earnings growth stronger and recruitment difficulties building in some sectors, UK companies may well now be really stepping up their efforts to lift productivity by getting more out of their existing workers and also stepping up investment,” said Howard Archer, chief UK and European economist at IHS Global Insight.

Archer said the Bank of England will note the growth in labour costs, which has been a factor in deciding when to raise interest rates, “so if this moves up significantly further it will strengthen the case for a hike sooner rather than later in 2016”.