Growth boost despite output concerns

Tim Entwistle from BDO
Tim Entwistle from BDO
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Employers in the UK plan to keep hiring more staff, but concerns remain about the country’s failure to raise productivity, a new report has warned.

The latest Business Trends Report by BDO gave an employment index reading of 113.0 for March – well above its long-term trend – and the suggestion is that businesses will continue to boost job creation in the coming months.

While it is encouraging to see strong business confidence, the continuing poor labour productivity performance is a very significant concern.

Tim Entwistle - Partner and head of BDO LLP

However there are still areas of concern for the economy, as workers’ output per hour has been static during the last two years of the recovery.

The report states: “Such a long period of flat productivity is unprecedented in the period since World War II and the trend is unique amongst advanced economies.”

Despite this negative trend, BDO’s Output and Optimism Indices, which predict economic growth three and six months ahead respectively, remain significantly above the 100 mark, which indicates growth above the long-term trend.

Tim Entwistle, partner and head of BDO LLP in the North West, said: “While it is encouraging to see strong business confidence, the continuing poor labour productivity performance is a very significant concern.

“Although employment growth in recent years has been strong, much of this has been in part-time jobs.

“Productivity ultimately determines our prosperity so it is a crucial area that must be addressed. Policymakers of all persuasion must take on this productivity puzzle.”

North and Western Lancashire Chamber of Commerce chief executive Babs Murphy urged caution over the figures.

She said: “These figures may not be entirely representative of the facts. BDO says unemployment fell by 102,000 in just three months, which is wonderful news in its own right.

“But static levels of productivity are to be expected somewhat. What people must remember is that with so many new jobs being created, it takes time for employees to be trained and to reach higher levels of productivity.

“Instead of dwelling in a perceived lack of productivity growth, we should celebrate the positive news that unemployment continues to fall and business confidence is high.”