Productivity Decline in Britain’s Public Sector

By David Milliken
LONDON (Reuters) – Productivity in Britain’s public sector recorded a year-on-year decline in the three months to the end of September 2024. This decline comes as the health service struggles to recover from the impact of the COVID-19 pandemic and a wave of industrial action.

Bleak productivity figures in both the public and private sectors in recent years have contributed to stagnant living standards, a rising tax burden, and a general decline in public services, including long waits for public healthcare.

According to the Office for National Statistics, productivity in the public sector—essentially how much in services the public receive per pound spent—fell by 1.4% in the third quarter of last year compared to the same period a year earlier, but rose by 0.2% compared to the previous quarter.

Healthcare productivity specifically was down by 2.4% year-on-year, despite an end to strikes by doctors and other health workers after a newly elected Labour government agreed to larger pay hikes than the previous Conservative government.

Measured productivity in the health service plummeted by 39% at the onset of the COVID-19 pandemic due to severe disruptions in routine care. While there was a partial recovery, productivity fell again due to strikes over pay in 2022 and 2023. As of the third quarter of 2024, healthcare productivity remains 19% below its level in the last quarter of 2019. Since 2019, resources allocated to public healthcare have increased by 30%, but output has only risen by 6%.

Overall, productivity in the public sector, which is largely driven by health and education spending, has decreased by 8% since 2019. The Bank of England recently noted that rising employment in the public sector, particularly in healthcare, seems to be affecting overall productivity negatively.

For the economy as a whole, output per hour worked has grown by 2% since 2019. It is important to note that public sector productivity does not directly measure staff performance; rather, it reflects the ratio of input costs, such as wages, materials, and rents, to output, which can be challenging to quantify since many public services do not have clear prices.