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The dictionary definition of productivity is ‘produc[ing] or do[ing] a lot in comparison to the amount of resources used’ – but that’s become an almost unattainable goal for many businesses today.
Recent events, including Covid, have left organisations in a battle for talent. With demand for goods and services high, and skills in short supply, the need to do more with less is becoming increasingly important.
Despite what might seem like a gloomy outlook, the UK is still seen as a hotbed for business. Between January to March 2023, the total register for public companies increased by 63,462, which is 8.2% more than the same period in the previous year. However, the business environment is also challenging:dissolutions increased by 8.6% compared to January to March 2022.
What is business productivity?
The Office for National Statistics (ONS) has been measuring labour productivity since 1997. In this context, productivity refers to the measure of output that is produced per worker, or another measurable ‘unit’ of labour input.
If a business or industry has high productivity then it is able to produce more output, which are its goods or services measured on a gross value added (GVA) basis, per hour a workforce puts in.
According to the ONS, productivity can be used to determine long-term living standards. High productivity signifies a rise in supply for many goods, increasing availability, reducing real prices and increasing the value of real wages.
It’s well-known that investing in or developing new technologies, as well as human capital and training, can help to improve productivity. This is one of the reasons why interest is growing around tools such as business management software.
In June 2023, during a speech at the Centre of Policy Studies, Chancellor of the Exchequer Jeremy Hunt unveiled his ambitions to grow UK productivity. Here, he also cited the need for harnessing technology to remove the need for unnecessary administrative tasks as part of his productivity plan.
ECI’s Business Productivity Index
We analysed ONS data to see which industry’s productivity has grown the most, year-on-year (YOY).
To create our business productivity index, we used ONS productivity overview data from 20 industries relating to the final quarter of 2022. This was then segmented by industry and year, to understand percentage change over time.
Which UK industry is the most productive?
According to the data, IT and information services have seen the biggest boost to productivity, with a YOY increase of 13.71% since Q4 2022. This isn't surprising, with the UK’s drive toward becoming a technology and science superpower, and with more than three million people working in UK tech. Since the ONS started measuring labour productivity, its average lifetime output sits at 74.79, while in 2022 it reached 121.1.
This was followed by arts, entertainment and other service activities, which grew by 11.66%.
Although it still experienced a positive change, productivity growth for businesses manufacturing food products, beverages and tobacco rose the least YOY, by just 2.02%. This was the only manufacturing sub-sector featured on the list to experience an increase in productivity.
TOP 20 INDUSTRIES
INDUSTRY |
% Difference Year-on-Year |
IT and other information services |
13.71% |
Arts, entertainment and other service activities |
11.66% |
Professional services and support |
9.15% |
Services excluding financial and insurance activities and imputed rental |
7.14% |
Government services |
6.94% |
Distribution, transport, hotels and restaurants |
6.83% |
Legal and accounting activities, activities of head offices, management and consultancy activities, architectual and engineering activities |
6.28% |
Services excluding financial and insurance activities |
6.28% |
Services |
5.55% |
Wholesale, retail, accommodation and food service activities |
5.41% |
Residential care and social work activities |
2.94% |
Security and investigation activities, services to buildings and landscape activities, office administrative, office support and other business support activities |
2.60% |
Manufacture of food products, beverages and tobacco |
2.02% |
Utilities |
-0.88% |
Manufacture of wood and paper products, printing and reproduction of recorded media |
-2.77% |
Real estate activities excluding imputed rental |
-3.60% |
Manufacture of chemicals, chemical products and basic pharmaceutical products |
-4.21% |
Manufacture of computer, electronic and optical products and electrical equipments |
-4.64% |
Manufacture of basic metals and fabricated metal products |
-6.54% |
Manufacture of transport equipment |
-7.98% |
Which UK industry has the biggest room for improvement?
Production of transport equipment products took the biggest productivity hit, falling by 7.98% when compared to the same period last year.
Four other sectors of manufacturing also suffered a productivity loss – manufacture of wood and paper products, printing and reproduction of recorded media fell by 2.77%; manufacture of chemicals, chemical products and basic pharmaceutical products fell by 4.21%; and manufacture of computer, electronic and optical products and electrical equipment fell by 4.64%.
Although manufacture of basic metals and fabricated metal products fell by 7.98%, this industry’s lifetime average is the highest on the list, at 100.48 points. In comparison, the average lifetime output for real estate activities (excluding imputed rental) sits at just 70.75 overall and is the lowest.
Beyond manufacturing, the industry with the biggest YOY productivity decrease was real estate activities, which decreased by 3.60%, and production which fell by 2.50%.
Improving UK business productivity
Economists and business owners are particularly interested in the most recent productivity statistics, as they begin to show a true picture of the health of UK businesses following significant disruption during the Covid-19 pandemic and war in Ukraine. Economic instability and supply chain disruption have made it difficult to accurately measure the true output of many companies, and certain sectors were disproportionately affected.
Understanding the statistics acts as a vital yardstick as the UK enters into a new exciting age of technology and innovation, driven by AI-powered tools, automated systems and intelligent business management software. And with inflation rates still rising, these tools could prove crucial for driving efficiency and output.
The ONS has created a calculator for businesses to understand how productive they currently are.
Commenting on the index, Chris Fisher, VP of EMEA, LBMH at ECI Software Solutions said: “There’s a real push to improve productivity across the UK, getting us up to speed with some of our global peers. Recent statistics show that, across all industries, productivity is still at the same level as it was before the pandemic – though it has managed to successfully rise above an inevitable dip in 2020.
“Manufacturing in particular seems to be particularly harshly hit at the moment, likely to be still reeling from the effects of Covid-19 yet it also poses the most exciting opportunity. Data and IT services are becoming more and more accessible – and in turn, manufacturing businesses are well placed to make the most of the innovations coming out of the sector to help it work smart in the future.”
Ends.
Methodology
The business productivity index was created using ONS labour productivity overview data from 20 industries relating to the final quarter of 2022. This was then segmented by industry and year, to understand percentage change over time, and lifetime average.