London’s productivity has been impacted by inflationary pressures and unaffordable housing in the years following the COVID-19 pandemic. Despite being ranked as the country’s most productive region in 2022, London has hindered the overall labor productivity of the UK, according to the Office of National Statistics (ONS). The ONS recently released labor productivity figures for 2022, revealing output per hour and output per job performance levels for different regions.
In comparison to 2019, London experienced a 2.7 percent decline in productivity in 2022, making it the region with the largest negative contribution to productivity growth. Wales was the only other region to see a decline in productivity at 1.3 percent. On the other hand, other regions such as the southeast, West Midlands, and Yorkshire and the Humber showed growth in productivity in 2022 compared to pre-pandemic levels. The northwest had the highest contribution to productivity levels at 7.9 percent, followed by Northern Ireland at 6.5 percent.
Despite its lower productivity levels compared to 2019, London still had a higher output per hour worked at 26.2 percent above the UK average. In contrast, Wales had an output per hour worked that was 17.3 percent below the UK average. The ONS calculates regional labor productivity by considering various factors such as the number of employees, the self-employed, His Majesty’s Forces, and government-supported trainees. Productivity hours are derived from estimates of average hours worked and productivity jobs.
When analyzing trends in labor productivity over the years, it is clear that the period following the global financial crisis in 2008 saw economic recession and sluggish growth. The subsequent impact of lockdowns during the pandemic further affected the productivity of businesses and workers. While regions like East Yorkshire and Greater Manchester managed to increase labor productivity, outer London west and northwest experienced a significant decline.
One factor that influenced productivity during the pandemic was the shift to remote working. Many businesses adopted remote and hybrid working models during the lockdowns, which continued even after restrictions were lifted. However, infrastructure expert Nick Smallwood highlighted that working from home had adverse effects on UK infrastructure projects, notably slowing down the delivery of the HS2 high-speed trainline. Despite these challenges, the ONS reported that 54 percent of businesses in the information and communication industry intended to continue using remote working in 2022.
Unaffordable housing and long commutes have also impacted London’s productivity in recent years. The high cost of living and inflationary pressures have made it difficult for workers to afford housing in the city, leading to longer commutes and reduced productivity. According to a survey conducted by Towergate Health and Protection, 98 percent of companies encouraged employees to return to the office, signaling a shift towards more office-based work. The Workers Union believes that finding a balance between remote and office work will likely improve productivity, benefiting both London and the broader UK economy.
In conclusion, London’s productivity has been affected by various factors such as inflationary pressures, unaffordable housing, and the shift to remote working during the COVID-19 pandemic. While the city still maintains a higher output per hour worked compared to the national average, its productivity levels have declined since 2019. However, as businesses and employees find a balance between remote and office work, there is potential for productivity to improve, ultimately benefiting London’s economy and the UK as a whole.
