The productivity of British workers in the second half of 2017 rose at the fastest rate since before the financial crisis, handing a rare boost to the government.

Labour productivity, or economic output per hour of work, rose by 0.7% in the three months to December, marking the second consecutive quarter for positive growth, the Office for National Statistics said. Together, the two periods showed the strongest growth rate seen since the second half of 2005.



But despite the positive performance, the rate of increase in worker efficiency for last year as a whole still languished below its pre-crisis levels, following a weak start to 2017.



Economists also warned the increase in productivity, which is seen as one of the most important determinants for raising living standards, may have come due to falling numbers of hours worked rather than because companies had substantially boosted their economic output.

Howard Archer, chief economic adviser to the EY Item Club, said the increase came following a surprising drop in the number of hours worked in the second half of last year – a trend that had since been reversed in the first months of 2018.

“The UK has a lot of catching up to do on the productivity front,” he said.

ONS deputy chief economist Richard Heysalso said much of the increase could have come from a fall in average hours worked, adding: “A weak start to the year means annual growth was only 1%, half the historic average rate.”



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Sluggish growth in the efficiency of workers in Britain, held back in part since the financial crisis by the creation of low-skilled jobs, has been key to holding down wage growth and rising living standards across the economy. As a result, boosting productivity has become a priority among ministers, who are attempting to use the industrial strategy to improve efficiency rates.

The improvements in the final quarter of 2017 were driven by non-financial services firms such as shops, hotels and restaurants, as well as manufacturers. The financial sector and firms involved in industrial production, such as electricity, gas and agriculture, acted as a drag on the growth rate.



However, the ONS said the productivity of British workers still remains well below the rates that could have been achieved had productivity growth continued at its pre-downturn rate. The UK lags much of continental Europe and many other major economic rivals, with labour productivity about 16.3% below the average for the other G7 economies.

Dave Innes, economist at the Joseph Rowntree Foundation, said low-wage sectors such as retail and hospitality had a particularly poor track record. Boosting productivity in these sectors to the levels seen in Germany, France and the Netherlands would close between a fifth and a quarter of the UK’s productivity gap with them, he said. “Improving pay and performance for our baristas and bar staff may be part of the answer,” Innes said.

Treasury minister Robert Jenrick said the latest figures were encouraging. “We want to increase productivity growth to ensure higher living standards for people across the country.”