Productivity is growing strongly but the UK still has a problem

Our economy has been growing consistently, if unspectacularly, for some time and yet for many people in many parts of the UK the idea that we have recovered from the downturn of 2008 is not one they would recognise.

That's because we are living through the most sustained pressure on household incomes since the mid-nineteenth century and economists believe low productivity growth is to blame.

Productivity is simply a measure of the amount of work generated per hour or per worker in the economy.

Output per hour across our economy grew consistently from the 1950s until the financial crisis in 2008. But since then, and for reasons that aren't entirely clear, it has flatlined.

Today the ONS announced that output per hour rose, between July and September, at it strongest pace in six years.

Productivity is above pre-crisis level but well below pre-crisis trend. Credit: ONS credit

Encouraging stuff but we still have a problem. Productivity is well below the pre-crisis trend. The bald and highly quotable fact is that it takes the average British worker five days to produce what the average American, German or French worker produces in four.

Sheffield has one of the lowest rates of productivity in the country and one of the lowest rates of average pay. Economists will tell you the two are linked.

We've spent the day looking at the efforts that are being made in the city to raise productivity in the hope it will deliver better jobs, higher pay and, ultimately, higher living standards.

It takes the average British worker five days to produce what the average American, German or French worker do in four. Credit: ITV News

Sheffield's problem is a national problem and therefore also the government's problem. Next Wednesday, in the Budget, the Office for Budget Responsibility will official downgrade its productivity forecasts, leaving a significant hole in the public finances.

If the OBR is right and the productive potential of the UK economy is permanently lower than it was before 2008 then the Chancellor, Philip Hammond, has a headache. He is banking on future tax revenues that won't materialise.

Expect to hear a lot from the Chancellor about investment in education, infrastructure and technology. Unless a way of reviving productivity growth can be found, we will either have to accept further cuts to public services or pay more tax.