London’s Impact on UK Labour Productivity Is Hampered Since Pandemic: ONS

London’s productivity has been holding back the UK’s labor 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).

Compared to 2019, London’s productivity in 2022 was lower than in any UK region. The capital’s productivity decreased by 2.7 percent between 2019 and 2022, with Wales being the only other region to experience a decline (1.3 percent).

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

All other UK regions, including the southeast, West Midlands, and Yorkshire and the Humber, showed growth in 2022 compared to the pre-pandemic numbers.

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

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Despite showing the worst performance 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 calculates regional labor productivity by summing the numbers of employees, self-employed individuals, His Majesty’s Forces, and government-supported trainees. Productivity hours are estimated based on average hours and productivity jobs.

Remote Working

Research indicated various trends in labor productivity over the years, with periods of economic recession and sluggish growth following the global financial crisis in 2008.

Subsequent lockdowns impacted the productivity of businesses and the working population in Britain.

While East Yorkshire and Greater Manchester seemed to have addressed challenges by increasing labor productivity, there was a significant decline in outer London west and northwest.

During the pandemic, restrictions on movement and travel led many businesses to adopt remote working. Even after restrictions were lifted, remote and hybrid working models remained prevalent across the UK.

Affected by the cost of living, high inflation pressures, unaffordable housing, and long commutes have all contributed to London’s productivity struggles in recent years.

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

By February 2022, 84 percent of workers who had to work from home during lockdowns planned to have a mix of remote and in-office work going forward.

On the other hand, only 3 percent of accommodation and food services companies and 5 percent of construction companies intended to incorporate increased homeworking into their permanent business models.

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

Reacting to the ONS labor productivity figures, the union stated, “As businesses and employees find a balance between remote and office work, productivity is likely to improve, benefiting not only the capital but also the broader UK economy.”