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Statistical bulletin: Labour Productivity, Q1 2012 This product is designated as National Statistics

Released: 29 June 2012 Download PDF

Key points

  • UK labour productivity fell by 1.3 per cent in the first quarter of 2012 on an output per hour basis. Market sector productivity fell by 1.6 per cent on this basis.
  • Labour productivity in the services sector fell by 0.4 per cent in Q1.
  • Labour productivity in manufacturing fell by 2.6 per cent in Q1, the steepest drop since Q4 2008. Labour productivity in the broader production sector fell by 2.7 per cent.
  • UK unit labour costs increased by 1.4 per cent in Q1. Manufacturing unit wage costs increased by 2.1 per cent over this period.

About this release

This quarterly bulletin contains labour productivity statistics for the first quarter of 2012 for the whole economy and a range of industries, together with selected data on unit labour costs and regional productivity indicators.

Labour productivity measures the amount of real (inflation adjusted) economic output that is produced by a unit of labour input (in terms of workers, jobs and hours worked) and is a key indicator of economic performance.

Output statistics in this release are consistent with Quarterly National Accounts published on 28 June 2012. Labour input measures are consistent with Labour Market Statistics published on 20 June 2012.

More information on sources used in this release is available in the Note on sources section below.

Interpreting these statistics

At the whole economy level output (gross value added – GVA) fell by 0.4 per cent in the first quarter of 2012 (slightly more than the 0.3 per cent fall in the headline GDP measure), while the Labour Force Survey (LFS) shows that the number of workers and jobs (which are closely correlated) each rose by 0.4 per cent, and the number of hours worked rose by 0.9 per cent. Arithmetically, therefore, UK output per worker and output per job fell sharply over this period (by 0.7 per cent and 0.9 per cent respectively, the difference being due to rounding), while UK output per hour fell by 1.3 per cent ( Table 1 (868.8 Kb ZIP) and Figures 1 and 2).

One factor to bear in mind when interpreting these statistics is that separate Office for National Statistics (ONS) data on workforce jobs, based largely on business surveys, show a significantly stronger increase in jobs over Q1 than the LFS. Productivity estimates in this bulletin use data from business surveys on the distribution of jobs across the economy, but benchmark the overall number of jobs in the economy to the LFS estimate. For more information on the differences between LFS and workforce jobs see the article Reconciliation of Estimates of Jobs, June 2012 (Phillips (2012)).

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, while unit wage costs are a narrower measure, excluding non-wage labour costs.  Growth rates of these series can be decomposed as growth of labour costs (or wages) per unit of labour input minus growth of labour productivity.  An inverse relationship between unit costs and productivity tends to be observed, as wage growth is less cyclical than productivity.  Unit labour and unit wage costs also provide an indication of inflationary pressures in the economy.

There are extensive revisions to previously published labour productivity estimates in this bulletin, principally reflecting revisions to GVA estimates arising from the annual Blue Book balancing exercise. The only revisions to labour input estimates are due to routine updates to seasonal adjustment factors. For further information on the Blue Book revisions, see Impact of changes in the National Accounts and economic commentary for 2012 quarter 1, published on 28 June 2012. A research note on sources of revisions to labour productivity estimates is available on the ONS website (145.4 Kb Pdf) .

Most of the series in this release are designated as National Statistics, meaning their production has been subject to rigorous quality assurance and methodological scrutiny.  However, some service sector estimates use component series from the Index of Services (IOS) which are designated as experimental statistics (that is, not yet accredited as National Statistics, for example because the methodology is under development or reflecting concerns over data sources).  Market sector GVA is also an experimental series.  Labour productivity estimates that use these series as their numerators are also labelled as experimental statistics. 

For more information on interpreting these statistics see the Background notes section of this bulletin, and the labour productivity Quality and Methodology Information paper.

Whole economy labour productivity

See also Table 1 in the reference tables (868.8 Kb ZIP) .

Figure 1: Whole economy output per worker

United Kingdom

Figure 1: Whole economy output per worker
Source: Office for National Statistics

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Figure 2: Whole economy output per hour

United Kingdom

Figure 2: Whole economy output per hour
Source: Office for National Statistics

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Whole economy labour productivity components (seasonally adjusted)

Per cent
Output Productivity Jobs Productivity Hours
Change on quarter a year ago Change on previous quarter Change on quarter a year ago Change on previous quarter Change on quarter a year ago Change on previous quarter
2009 Q1 -6.1 -1.5 -0.9 -0.3 -3.1 -1.8
Q2 -5.5 -0.2 -2.2 -1.0 -2.5 -0.3
Q3 -3.6 0.3 -1.6 0.0 -3.1 -0.8
Q4 -0.9 0.5 -1.4 -0.1 -2.0 0.9
2010 Q1 1.1 0.4 -1.5 -0.4 -1.3 -1.1
Q2 2.2 0.9 0.4 0.9 0.4 1.4
Q3 2.5 0.6 0.9 0.5 1.4 0.2
Q4 1.5 -0.5 0.7 -0.3 0.4 -0.1
2011 Q1 1.6 0.5 1.7 0.6 1.7 0.2
Q2 0.7 0.0 0.8 0.0 -1.0 -1.3
Q3 0.7 0.6 -0.3 -0.6 -0.8 0.4
Q4 0.9 -0.3 0.1 0.1 -0.3 0.4
2012 Q1 0.0 -0.4 -0.1 0.4 0.4 0.9

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Unit labour costs

See Table 2 in the reference tables (868.8 Kb ZIP) .

In the first quarter of 2012, whole economy unit labour costs were 1.4 per cent higher than in the previous quarter. This increase is entirely due to lower productivity; labour costs per hour were broadly unchanged in Q1.

Figure 3: Whole economy unit labour costs

United Kingdom

Figure 3: Whole economy unit labour costs
Source: Office for National Statistics

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Manufacturing unit wage costs increased by 2.1 per cent in Q1, reflecting the steep fall in labour productivity in this period. As well as being a more narrow measure than unit labour costs, manufacturing unit wage costs use average weekly earnings (a measure of employee earnings) to proxy earnings of the self employed in the manufacturing sector, which is inconsistent with reported income of the self employed. ONS is currently developing estimates of manufacturing unit labour costs to address these issues.

Figure 4: Manufacturing unit wage costs

United Kingdom

Figure 4: Manufacturing unit wage costs
Source: Office for National Statistics

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Manufacturing labour productivity

See Tables 1, 3 and 4 in the reference tables (868.8 Kb ZIP) .

Labour productivity in the manufacturing sector recovered more strongly from the 2008-09 recession than productivity in services and the economy as a whole, but has dropped back in the last two quarters. Comparing 2012 Q1 with the trough of the recession in 2009 Q2, manufacturing output has increased by 4.7 percentage points, hours worked in manufacturing have fallen by 3.0 percentage points and output per hour has increased by 8.0 percentage points.

Figure 5: Manufacturing output per job

United Kingdom

Figure 5: Manufacturing output per job
Source: Office for National Statistics

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Figure 6: Manufacturing output per hour

United Kingdom

Figure 6: Manufacturing output per hour
Source: Office for National Statistics

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Most sub-sections of manufacturing experienced reductions in productivity on an output per hour basis in Q1. An exception was divisions 26–27 (computer, electronic and optical equipment).

Manufacturing labour productivity components (seasonally adjusted)

Per cent
Output Productivity Jobs Productivity Hours
Change on quarter a year ago Change on previous quarter Change on quarter a year ago Change on previous quarter Change on quarter a year ago Change on previous quarter
2009 Q1 -12.7 -5.2 -6.8 -2.8 -10.5 -5.7
Q2 -11.1 0.2 -8.2 -2.2 -8.8 -0.3
Q3 -10.3 -0.4 -6.7 -0.1 -8.3 -1.4
Q4 -4.3 1.1 -5.3 -0.4 -6.1 1.3
2010 Q1 1.7 0.8 -4.4 -1.8 -2.0 -1.6
Q2 3.4 1.9 -2.2 0.1 -0.9 0.8
Q3 5.4 1.6 -1.9 0.2 0.5 0.0
Q4 4.8 0.5 -1.4 0.1 0.0 0.8
2011 Q1 4.7 0.7 0.0 -0.4 1.9 0.3
Q2 3.1 0.3 -1.0 -0.9 -2.1 -3.2
Q3 1.2 -0.3 -2.4 -1.1 -3.7 -1.6
Q4 -0.4 -1.1 -3.2 -0.7 -5.2 -0.7
2012 Q1 -1.4 -0.3 -2.1 0.7 -3.3 2.3

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Services labour productivity

See Tables 1, 5 and 6 in the reference tables (868.8 Kb ZIP) .

Output per hour in the services sector has been very subdued since the end of the recession. Comparing 2012Q1 with 2009Q2, output in services has increased by 3.3 percentage points, and hours have increased by 2.0 percentage points, delivering cumulative productivity growth of just 1.2 percentage points. Output per hour in section K (Financial and insurance activities) has fallen by 8.3 percentage points over this period, and fell further in Q1. By contrast, output per hour in section N (Administrative and support service activities) has increased by 12.8 percentage points since the trough of the recession.

Figure 7: Services output per job

United Kingdom

Figure 7: Services output per job
Source: Office for National Statistics

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Figure 8: Services output per hour

United Kingdom

Figure 8: Services output per hour
Source: Office for National Statistics

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Services labour productivity components (seasonally adjusted)

Per cent
Output Productivity Jobs Productivity Hours
Change on quarter a year ago Change on previous quarter Change on quarter a year ago Change on previous quarter Change on quarter a year ago Change on previous quarter
2009 Q1 -4.1 -0.5 -0.4 -0.1 -2.3 -1.4
Q2 -3.5 0.0 -1.4 -0.7 -1.4 0.0
Q3 -1.3 0.5 -0.7 0.2 -2.2 -0.7
Q4 0.6 0.6 -0.5 0.1 -1.0 1.1
2010 Q1 1.3 0.2 -0.6 -0.2 -0.6 -1.0
Q2 1.4 0.2 1.0 0.9 0.6 1.2
Q3 1.4 0.4 1.4 0.6 1.6 0.3
Q4 0.4 -0.4 1.1 -0.2 0.4 -0.1
2011 Q1 0.9 0.7 2.1 0.8 1.6 0.2
Q2 1.0 0.2 1.3 0.1 -0.5 -0.9
Q3 1.4 0.8 0.0 -0.7 -0.4 0.4
Q4 1.6 -0.2 0.5 0.3 0.5 0.8
2012 Q1 1.0 0.2 0.1 0.4 1.0 0.7

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Market sector labour productivity - experimental

See Table 7 in the reference tables (868.8 Kb ZIP) .

Market sector output per worker fell by 1.1 per cent in Q1, and market sector output per hour fell by 1.6 per cent.

These falls in labour productivity are steeper than for the UK economy as a whole, reflecting a small increase in productivity in the predominantly non-market sections O–Q (Government Services) in the first quarter. Since the trough of the recession, hours worked have fallen more steeply in sections O–Q than any other section of services apart from section H (Transportation and storage).

Figure 9: Market sector output per hour

United Kingdom

Figure 9: Market sector output per hour
Source: Office for National Statistics

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Revisions

Table R1 (868.8 Kb ZIP)  shows revisions to growth rates of the main productivity variables for the whole economy, manufacturing and services between this release and the previous release on 29 March 2012. 

The principal reason for revisions in this release is revisions to GVA data, arising from the annual Blue Book balancing process. This has led to revisions to levels and growth rates of all the GVA series used as the numerators in labour productivity estimates. Further information on the Blue Book revisions can be found in the article Impact of changes in the National Accounts and economic commentary for 2012 quarter 1.

The Revisions analysis table summarises differences between first published estimates for each of the statistics in the first column with the estimates for the same statistics published three years later. This summary is based on five years of data, that is, for first estimates of quarters between 2004Q2 and 2009Q1, which is the last quarter for which a three-year revision history is available. The averages of these differences with and without regard to sign are shown in the right hand columns of the table, and these can be compared with the value of the estimates in the latest quarter, shown in the second column. Additional information on revisions to these and other statistics published in this bulletin is available in the Revisions triangles (868.8 Kb ZIP) component of this release.

This revisions analysis shows that whole economy productivity growth estimates have tended to be revised down over time, by 0.3 to 0.4 percentage points (on a year-on-year basis), while unit labour cost growth estimates have tended to be revised up by a similar magnitude. Absolute revisions have been larger for unit labour costs than for productivity. Were this pattern of revisions to continue into the future, growth of output per hour in Q1 would be revised down from -0.4 per cent (year on year) to -0.7 per cent in three year’s time, and growth of unit labour costs would be revised up from 3.4 per cent to 3.7 per cent over the same period. 

Revisions analysis

Whole economy: Value in latest period (per cent) Revisions between first publication and estimates three years later
Average over 5 years (bias) Average over 5 years without regard to sign (average absolute revision)
Output per worker. Change on quarter a year ago 0.0 -0.4 0.6
Output per job. Change on quarter a year ago 0.0 -0.3 0.6
Output per hour. Change on quarter a year ago -0.4 -0.3 0.5
Unit labour costs. Change on quarter a year ago 3.4 0.3 0.9
Unit wage costs. Change on quarter a year ago 2.1 0.2 0.9

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A short paper explaining the sources of revisions to labour productivity estimates (145.4 Kb Pdf) is available as part of the Sources of revisions to labour productivity, June 2012 release.

Note on sources

The measure of output used in these statistics is the chain volume measure of Gross Value Added (GVA) at basic prices, with the exception of the regional analysis in Table 9 where the output measure is nominal GVA (NGVA). These measures differ because NGVA is not adjusted to account for price changes; this means that if prices were to rise more quickly in one region than the others, then it would be reflected in improved measured productivity performance in that region relative to the others.

Labour input measures used in this bulletin are known as 'productivity jobs' and 'productivity hours'. Productivity jobs differ from the workforce jobs (WFJ) estimates published in Table 6 of the Labour Market Statistics Bulletin, in three ways:

  • To achieve consistency with the measurement of GVA, the employee component of productivity jobs is derived on a reporting unit (RU) basis, whereas the employee component of the WFJ estimates is on a local unit (LU) basis. This is explained further.

  • Productivity jobs are scaled so industries sum to total LFS jobs. Note that this constraint is applied in non-seasonally adjusted terms. The nature of the seasonal adjustment process means that the sum of seasonally adjusted productivity jobs by industry (and productivity hours – see below) can differ slightly from the seasonally adjusted LFS totals.

  • Productivity jobs are calendar quarter average estimates whereas WFJ estimates are provided for the last month of each quarter.

Productivity hours are derived by multiplying productivity jobs at an industry level (before seasonal adjustment) by average actual hours worked from the LFS at an industry level. Results are scaled so industries sum to total unadjusted LFS hours, and then seasonally adjusted. Industry estimates of average hours derived in this process differ from published estimates (found in Table HOUR03 in Labour Market Statistics) as the LFS allocates all hours worked to the industry of main employment, whereas the productivity hours system disaggregates LFS hours into both industry of main employment and secondary employment.

Whole economy unit labour costs indices are calculated as the ratio of total labour costs (that is, the product of labour input and costs per unit of labour) to GVA. Further detail on the methodology can be found in Revised methodology for unit wage costs and unit labour costs: explanation and impact.

Manufacturing unit wage costs indices are calculated as the ratio of manufacturing average weekly earnings (AWE) to manufacturing output per filled job. ONS does not currently produce unit wage costs figures for the services sector or unit labour costs below whole economy level, but is reviewing the scope to do so. See the Background notes to this bulletin for more information.

What is a reporting unit?

The term 'enterprise' is used by ONS to describe the structure of a company. Individual workplaces are known as 'local units' and a group of local units under common ownership is called the 'enterprise'. Reporting units are the parts of enterprises that return data to ONS. While the majority of reporting units and enterprises are the same, larger enterprises have been split into reporting units to make the reporting easier.

For most business surveys run by ONS, forms are sent to the reporting unit rather than local units, in other words, to the head office rather than individual workplaces. This enables ONS to gather information on a greater proportion of total business activity than would be possible by sending forms to a selection of local units. But it has the disadvantage that it is difficult to make regional estimates – for instance all the employment of, say, a chain of shops would be reported as being concentrated at the site of the head office.

Further differences between reporting unit and local unit data can be seen in the industry coding. Take, for example, a reporting unit with three cake shops and one bakery, each employing five people. The local unit analysis would put 15 employees in the retail sector and five employees in the manufacturing sector. But the reporting unit series puts all 20 people into the sector with the majority activity, in this case, retailing. Detailed industry figures compiled using the local unit approach will therefore be different from industry figures using the reporting unit approach, although the totals will be the same at the whole economy level.

Background notes

  1. This statistical bulletin

    This statistical bulletin presents Labour Productivity estimates for the UK. More detail can be found on the Productivity Measures Topic page on the ONS website.

    Index numbers are referenced to 2009=100, are classified to the 2007 revision to the Standard Industrial Classification (SIC) and are seasonally adjusted.

    Quarter on previous quarter changes in output per job and output per hour worked for some of the manufacturing sub-sections and services sections should be interpreted with caution as the small sample sizes used can cause volatility.

  2. Experimental series

    Labour productivity estimates for some service sections use GVA series from the Index of Services IOS) which are designated as experimental, meaning that they are not yet designated as National Statistics.  Market sector GVA is also an experimental series. Since labour productivity estimates are derived as ratios of these GVA series and corresponding labour input series, the resulting labour productivity estimates are also designated as experimental statistics.

    Labour productivity estimates for the following services industries are published on an experimental basis:

    K – Finance and insurance,

    L – Real estate activities,

    M – Professional, scientific and technical activities,

    N – Administrative and support services,

    O–Q – Government services,

    R – Arts, entertainment and recreation,

    S – Other service activities.

    The criteria for distingishing between experimental and National Statistics were set out at the launch of the Index of Services (IOS) in 2000, and include the proportion of data on which the component series are based, and the existence of suitable quality assurance processes. ONS published a review of the experimental components of IOS in 2011.

    Details of the market sector GVA methodology can be found in Market sector GVA productivity measures (241.1 Kb Pdf) .

  3. Quality and Methodology

    A revised and updated Quality and Methodology Information paper for Labour Productivity (649 Kb Pdf) was published in March 2012. This paper describes the intended uses of the statistics presented in this publication, their quality and methods used to produce them. It also includes more information on the uses and limitations of labour productivity estimates.

  4. Future developments

    ONS is currently undertaking a review of RU– and LU– based measures of employment by industry, which may lead to changes in methodology and results for productivity jobs and productivity hours. We are also undertaking a review of seasonal adjustment, including reviewing the point at which seasonal adjustments are made. Currently, productivity jobs and productivity hours are separately seasonally adjusted and divided into seasonally adjusted estimates of GVA. Methodologically it would be preferable to construct unadjusted productivity estimates using numerators and denominators before seasonal adjustment, and then to seasonally adjust the resulting productivity estimates. But in this case, published productivity estimates would typically not be exactly consistent with published output and labour input estimates.

    As mentioned above, ONS is reviewing the scope to publish section-level estimates of unit labour costs (ULCs), using an analogous methodology to that used in constructing whole economy ULCs. This methodology exhibits greater consistency between labour market and National Accounts data, in particular with respect to labour costs attributable to the self employed. Further information can be found on the ULC Methodology page.

    We welcome views and comments from users on these and other suggestions for development of productivity statistics. Following ONS best practice, we will publish details of the impact of proposals affecting statistics in this release prior to their implementation.

  5. Other data on productivity

    ONS publishes international comparisons of labour productivity in levels and growth rates for the G7 countries.

    More international data on productivity are available from the OECD, Eurostat, and the Conference Board.

    ONS also publishes experimental estimates of multi-factor productivity (117.3 Kb Pdf)  (MFP), which decompose output growth into the contributions that can be accounted for by labour and capital inputs. In these estimates, the contribution of labour is further decomposed into quantity (hours worked) and quality dimensions. 

    Lastly, ONS publishes a range of public sector productivity measures and related articles. These measures define productivity differently from that employed in the ONS labour productivity and MFP estimates. Further information can be found in the article Comparing different estimates of productivity produced by the Office for National Statistics (Phelps (2010)) (252.5 Kb Pdf) .

    More information on the range of ONS productivity estimates can be found in the ONS Productivity Handbook.

  6. Publication policy

    Details of the policy governing the release of new data are available from the Media Relations Office

    ONS publishes a pre-release access list (34.1 Kb Pdf) for each of its publications, outlining the roles of those people granted access to the bulletin 24 hours before the general public.

  7. Time series data

    All of the data in this release can be downloaded free of charge from the ONS website. Additionally, disaggregated data on productivity jobs and productivity hours are available on request. 

    To obtain a full time series of the data from the bulletin or parent release:

    1. Select 'Data in this release' (top right of page),

    2. Select 'datasets associated with this release' (left hand side of page),

    3. Select the latest release,

    4. Select 'Select series from this dataset' (Green button, top right),

    5. Select the reference table of interest,

    6. Select the series of interest (note you can use ctrl and shift to select multiple series for a custom download),

    7. Select 'download'.

  8. Quality

    National Statistics are produced to high professional standards set out in the Code of Practice for Official Statistics. They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from political interference.

  9. User engagement

    ONS is keen to develop a greater understanding of the use made of labour productivity statistics. If you have something to tell us, please use this feedback form, or email us at productivity@ons.gsi.gov.uk.

    You can follow ONS on Twitter, Facebook and watch our videos on the ONS YouTube channel. 

  10. Special events

    Details of special events with a potential impact upon statistics can be found on the ONS website.

  11. Copyright and reproduction

    © Crown copyright 2012

    Under the terms of the Open Government Licence and UK Government Licensing Framework, anyone wishing to use or re-use ONS material, whether commercially or privately, may do so freely without a specific application for a licence, subject to the conditions of the OGL and the Framework.

    For further information, contact the Office of Public Sector Information, Crown Copyright Licensing and Public Sector Information, Kew, Richmond, Surrey, TW9 4DU.

    Tel: +44 (0)20 8876 3444

    Email: psi@nationalarchives.gsi.gov.uk

  12. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk

    These National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority.

Statistical contacts

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Mark Franklin +44 (0)1633 455981 ONS productivity@ons.gsi.gov.uk
Get all the tables for this publication in the data section of this publication .
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