Productivity overview, UK: January to March 2023

Labour productivity

• Output per hour worked in Quarter 1 (Jan to Mar) 2023 decreased 0.6% compared with Quarter 1 2022, the weakest annual growth since Quarter 1 2013, excluding the coronavirus (COVID-19) pandemic.

• This result is confirmed by data on output per worker and output per job in Quarter 1 2023, which were respectively 0.9% and 1.0% lower than the same quarter a year ago, the weakest annual growth for both since Quarter 3 (July to Sept) 2009, excluding the coronavirus pandemic.

• Relative to the same quarter a year ago, the administrative service and construction industries made the biggest upwards contribution to annual productivity growth.

Labour costs and labour income

• The labour share of income was 58.6% in Quarter 4 (Oct to Dec) 2022 (the latest time period available) compared with 59.9% in Quarter 3 2022 and 60.3% in Quarter 4 2021.

• Nominal unit labour costs grew by 1.3% quarter-on-quarter in Quarter 4 2022 and were 6.0% higher than in Quarter 4 2021, both instances attributed to increases in total nominal employment costs with real gross value added (GVA) remaining fairly flat.

• Average labour compensation per hour increased by 1.7% compared with Quarter 3 2022 and by 5.9% compared with Quarter 4 2021, caused by similar increases in unit labour costs (ULCs).

In Quarter 1 (Jan to Mar) 2023, output per hour worked, our headline measure of labour productivity, was 0.6% below the same quarter a year ago. This confirms the estimate contained in our UK productivity flash estimate article, that Quarter 1 2023 saw the largest fall since Quarter 1 2013, excluding the coronavirus (COVID-19) pandemic period. Output per hour worked went down because hours worked grew at a higher rate (0.8%) over the last year than gross value added (GVA) (0.2%).

Output per worker and output per job were 0.9% and 1.0% below their respective Quarter 1 2022 levels. This is because of higher growth in the number of workers (1.1%) and jobs (1.2%) than in GVA (0.2%).

Output per hour worked was 0.6% above its pre-coronavirus pandemic levels (2019 average level) in Quarter 1 2023. Figure 1 shows that this growth was caused by an increase of GVA by 0.6% since 2019, while the number of hours worked were unchanged over the period, with growth of 0.0%.

Output per worker was flat compared with its pre-coronavirus pandemic levels (0.0%), driven by the growth in the number of workers (0.6%) balancing the growth in GVA (0.6%).

Output per job was 0.4% below its pre-coronavirus pandemic levels. This was because of a larger increase in the number of jobs (1.0%) than in GVA (0.6%).

Compared with its pre-coronavirus pandemic levels, output per worker grew less than output per hour because, on average, workers did fewer hours per week in Quarter 1 (Jan to Mar) 2023 than in 2019. Similarly, output per job fell more than output per worker because more workers are now doing second jobs.

Figure 2 shows the contribution to annual growth in output per hour worked for 17 industries in Quarter 1 (Jan to Mar) 2023 relative to the same quarter a year ago.

Administrative service and construction industries made the biggest upwards industry contribution to annual productivity growth. By contrast, finance and insurance and real estate industries showed the biggest negative contribution to productivity growth. The recreation and culture, energy, agriculture, other services (a residual category, including personal service activities not covered elsewhere in our Standard Industrial Classification (SIC) 2007), mining and quarrying, and the business services industries did not make any substantive contribution to productivity growth over the same period.

Figure 3 shows that real estate had the biggest fall in output per hour worked in Quarter 1 2023 compared with Quarter 1 2022. This was mainly driven by an increase in the number of hours worked. 

In administrative services, growth in output per hour worked was largely caused by an increase in gross value added (GVA), with a smaller contribution from a fall in hours worked.

The labour share of income fell in Quarter 4 (Oct to Dec) 2022 compared with Quarter 3 (July to Sept) 2022. However, Figure 4 shows unit labour costs and average labour compensation per hour continued to rise, caused by increasing total employment costs.

Labour productivity

Labour productivity measures how many units of output are produced for each unit of labour input and is calculated by dividing output by labour input.

Labour inputs

The preferred measure of labour input is hours worked ("productivity hours"), but workers and jobs ("productivity jobs") are also used.

Output

Output refers to gross value added (GVA), which is an estimate of the volume of goods and services produced by an industry and in aggregate for the UK.

Total employment costs

Total employment costs represent the total costs of purchasing labour in the economy, not including any such costs funded by employment subsidies.

Unit labour costs (ULCs) – nominal

ULCs measure the nominal cost of labour input per unit of real (inflation-adjusted) economic output.

Methodological information

Productivity estimates and their inputs are produced to a number of decimal points as reported in the accompanying datasets. However, within the bulletin we have rounded to one decimal point.

Information on the strengths and limitations of the labour productivity data, as well as the quality and accuracy of the data, is available in our Labour productivity Quality and Methodology Information (QMI).

In our labour costs and labour income dataset, we use estimates from the UK National Accounts that are periodically revised to account for updated data, new methods and new data sources. Therefore, please take these revisions into account if you are using these data for contract negotiations or prices.

We welcome feedback about our publication changes. To help us meet user needs, please email productivity@ons.gov.uk.