Experts warn that poor productivity is threatening UK growth

NIESR forecasters expect slow growth in the third quarter


Forecasters at the National Institute of Economic and Social Research (NIESR) have lowered their previous growth estimate for the British economy, which they now expect to slow in the third quarter.

NIESR said the economy would grow by 0.4 percent in the three months to September, down from a forecast of 0.8 percent they made in May. The current forecast is that:

  • The UK economy will grow by 2.5 per cent this year, and will remain close to this rate throughout the forecast period.
  • The recent increase in unemployment rate will be reversed in coming quarters.
  • CPI inflation will remain below target until the end of 2017.
  • The Bank of England will begin to raise rates in early 2016.
  • The key domestic unknown over the next few years remains the future path of productivity growth.

According to NIESR, the biggest domestic risk to the UK economy is the absence of meaningful productivity growth. Until this returns, ‘significant improvements in standards of living should not be expected’.

The rate of inflation is expected to remain around zero for the rest of this year. NIESR say that the absence of a rebound in oil prices, as well as the appreciation of sterling against a basket of currencies, weighs on their forecast for consumer price growth in the near term.

But overall, their outlook is fairly positive with the factors expected to be temporary:

“By 2017 we expect inflation to be more consistent with the Bank of England’s mandated target of 2 per cent per annum.”

Ruby Stockham is a staff writer at Left Foot Forward.

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8 Responses to “Experts warn that poor productivity is threatening UK growth”

  1. GhostofJimMorisson

    And yet the Greens and (I presume) Corbyn would massively increase public sector jobs, paid for by….answers on a postcard.

  2. stevep

    Paid for by us, for our benefit….. Not paid for by us so private profit can be made.
    Social Democracy is needed, Capitalism only works for the few, not the many.

  3. GhostofJimMorisson

    Spare me the platitudes, Steveo, they didn’t work for Ed, they don’t work for you. The point I was making is that our low-skilled, low productivity economy cannot sustain a bloated, expensive public sector indefinitely. We need a productive economy to sustain an effective public sector. You can’t have one without the other. Corbyn and Caroline Lucas bang on about the banking sector and the City; yet without them and the revenue they generate we could not sustain our public service, let alone pay for the plethora of infrastructure projects Corbyn as in mind.

  4. stevep

    Not a platitude, Jimbo, but a heartfelt belief based on experience.
    Governments can create economies to suit any flavour. At the moment it is Capitalism.
    Corbyn and Lucas understand this full well and would seek to create an economy that benefits the many, rather than the few, not to mention the environment we all live in.
    Properly regulated,the Banking and financial sectors would be our servants, not our masters.

  5. GhostofJimMorisson

    Proper progressive taxation would generate the revenue needed.

    You mean a return to squeezing the rich ’till the pips squeak’? Those days are gladly long gone. Corbyn and Lucas constantly berate the rich, denouncing them at every opportunity yet would happily take/steal their money to fund their vanity projects (such as the Green’s preposterous Citizens Allowance scheme, which Andrew Neill exposed for the almighty guff it was during that car crash interview with Natalie Bennett) Increase taxes to 1960s/70s levels and you deincentivise wealth creation. No bastard way would I kill myself trying to make my fortune to then have it stolen by Lefties who despise me for being wealthy.

  6. stevep

    Yes, proper taxation of the greedy. By your last paragraph, it sounds like you are one of them.

  7. GhostofJimMorisson

    Everyone with money is greedy? That’s illogical and silly thinking, Steveo, and you know it. I’m not wealthy. I’m actually unemployed at the moment. I’ve never earned more than 8 quid an hour in my life. This is partly why Labour lost. It is why Corbyn won’t succeed.

  8. Shane Warne

    ChostofJimMorisson is right. Progressive taxation won’t fix anything. The problems are much deeper than that. They’re structural and cultural.

    I just want to also add to what he mentioned earlier, the finance sector is easily the most productive sector in the entire UK (and probably the only one). Even the UK parliament isn’t even productive. They work far more days than other parliaments around the world, like the Australian parliament for example, yet without much to show for it. The Lords are a classic example of toffs who are given a job for no good reason. Why so many? It’s ridiculous.

    The UK has a real cultural issue. People are lazy and self-entitled. They think they’re still rich when in reality they’re simply living well beyond their means (and are over-leveraged). This may sound harsh but it’s the only way to move forward. Spending more won’t get you anywhere. You need to face reality, and promote efficiency, increase productivity, adopt sustainable debt/credit and sustainable growth, and deleverage from the high point of debt the nation is presently in (and try to minimise the negative impact as much as possible, by promoting the methods I mentioned just before).

    At present both governments aren’t doing things 100% correctly. But at least Osborne is on the right track by trying to promote fiscal prudence and responsibility, and at least he has identified productivity as the key issue. He is also at least smart enough to recognise that Europe is on a massive descent, and that China and India are undoubtedly the next two superpowers and hence the most important markets. Osborne is far from perfect. But he is also showing a very rare trait for a politician, he is actually looking at the long-term outlook of something!!!

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