Productivity still a puzzle as firms keep hiring, says BDO

BUSINESS hiring intentions are at “sky-high” levels, with figures stronger than the heady days before the slump, according to the Business Trends Report by accountants and business advisers BDO in Yorkshire.
By The Newsroom
Published 13th Apr 2015, 07:00 BST

With BDO’s Employment Index measuring 113.0 – well above its long-term trend – the report concludes that UK firms will continue to create more jobs in the coming months. However, the report also suggests that the UK is facing a deep-rooted productivity problem.

A BDO spokesman said: “The UK continues its puzzling
failure to increase productivity, despite continuing strong economic expansion. Workers’ output per hour has been static during the last two years of the recovery.

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“Such a long period of flat productivity is unprecedented in the period since the Second World War and the trend is unique among advanced economies.”

Despite this negative trend, BDO’s Output and Optimism Indices, which predict economic growth three and six months ahead respectively, remain well above the 100 mark, which indicates growth above the long-term trend.

The Output Index rose to 103.9 in March while the Optimism Index held firm at 104.9, revealing strong business confidence levels. Firms have been given an additional boost as input costs continue to fall, with BDO’s Inflation Index sitting at just 93.8 (down from 94.7 last month), indicating deflation.

Commenting on the findings, Terry Jones, the Leeds-based partner and head of BDO in Yorkshire, said: “While it is encouraging to see strong business confidence, the continuing poor labour productivity performance is a very significant concern. Although employment growth in recent years has been strong, much of this has been in part-time jobs.

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“Productivity ultimately determines our prosperity so it is a crucial area that must be addressed. Policymakers of all persuasion must take on this productivity puzzle.”

The BDO Monthly Business Trends Indices are prepared on behalf of BDO by the centre for economics and business research ltd, an independent economics consultancy. The indices are calculated by taking a weighted average of the results of the UK’s main business surveys. Taken together, the surveys cover more than 4,000 respondents.

Related topics:YorkshireWorkers