According to the Office for National Statistics (ONS), UK productivity fell 0.7% in the fourth quarter of 2011.
The poorest performing sector was the service sector which experienced a 1% fall in productivity for the quarter, compared with a 0.7% increase in the manufacturing sector.
As a result of falling productivity the ONS estimated unit labour costs rose by an average of 1.2%. John Philpott, Chief Economic Advisor at the Chartered Institute of Personnel and Development (CIPD) said: “Manufacturing productivity is powering ahead which bodes well for business competitiveness and export led growth. But signs that service sector productivity is falling and putting upward pressure on unit labour costs spells trouble for jobs and pay.
“While businesses operating in private sector services continue to experience weak demand they will not only be reluctant to hire more staff but may need to ask existing staff to accept a further period of pay restraint to avoid job cuts.”
The reduction in service sector productivity and the potential risks this spells for any recovery in the labour market is particularly worrying given that the vast majority of UK jobs are in the service industries.
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