London Holding Back UK Labour Productivity Since Pandemic: ONS

Tourists shelter from the rain as they walk over Westminster Bridge, with the Houses of Parliament in the background, in London on March 10, 2024. Henry Nicholls/AFP via Getty Images

London has been holding back the UK’s labour productivity since the COVID-19 pandemic, despite ranking first as the country’s most productive region in 2022, according to the Office of National Statistics (ONS).

The ONS on Monday published labour productivity figures for 2022, which show regional and subregional output per hour and output per job performance levels.

When compared to 2019, London’s productivity levels in 2022 were lower than in any UK region. The capital’s productivity dropped by 2.7 percent between 2019 and 2022, with Wales the only other region to fall (1.3 percent).

“Owing to its size, this means London has the largest negative contribution to productivity growth of any region,” the ONS said.

All other UK regions, including the southeast, West Midlands, and Yorkshire and the Humber, showed growth in 2022, compared to the numbers just before the onset of the pandemic.

The northwest made the largest contribution to productivity levels at 7.9 percent, followed by Northern Ireland at 6.5 percent.

Despite the worst performance, when compared to 2019, in the latest 2022 figures, London’s output per hour worked was 26.2 percent above the UK average. In contrast, Wales’s output was 17.3 percent below the UK average.

The ONS measures regional labour productivity by summing numbers of employees, the self-employed, His Majesty’s Forces, and government-supported trainees. Productivity hours are derived from estimates of average hours and productivity jobs.

The London Borough of Tower Hamlets had the highest productivity level, at 75 percent above the UK average. Outside of the capital, the regions of North Hampshire and the southeast performed at 54 percent above the national average.

The highest productivity in Scotland, at 23 percent above the UK average, was recorded in Edinburgh.

Remote Working

Research showed various trends in labour productivity over the years. The period following the global financial crisis in 2008 was marked by economic recession and subsequent sluggish growth.

Following that, Britain felt the impact of lockdowns on the productivity of businesses and the working population.

While East Yorkshire and Greater Manchester appeared to have dealt with the challenges by increasing labour productivity, a large decline was recorded in outer London west and northwest.

Restrictions on movement and travel during the pandemic saw many businesses turn to remote working. After the restrictions were lifted, remote and hybrid working models remained widespread across the UK.

Combined with the cost-of-living and high inflation pressures, unaffordable housing and long commutes have impacted London’s productivity in the last few years.

Infrastructure expert Nick Smallwood told the Treasury Committee last year that working from home had had adverse effects on all UK infrastructure projects. Mr. Smallwood said that it had significantly slowed down the delivery of the HS2 high speed trainline.

In 2022, the ONS reported that 54 percent of businesses in the information and communication industry said they intended to use the remote working model.

In February 2022, 84 percent of workers who had to work from home because of the lockdowns said they planned to carry out a mix of working at home and in their place of work in the future.

In contrast, only 3 percent of accommodation and food services companies intended to use increased homeworking as part of a permanent business model. In construction, that figure was 5 percent.

A survey of 500 HR professionals, published by Towergate Health and Protection in April, found that nearly all (98 percent) companies have continued to encourage employees to return to the office.

The shift to towards more office-based work is a “promising sign for London’s economic future,” the Workers Union said.

Reacting to the ONS labour productivity figures, the union said, “As businesses and employees find a balance between remote and office work, productivity is likely to improve, benefiting the capital and the broader UK economy.”