It is called the most important of all economic indicators and in the second of last year it turned around. Can we thank entrepreneurs?
The UK needed a sort of miracle. Maybe in Q3 and Q4 it got precisely that.
It all boils down to productivity. According to the ONS, by the midpoint of 2017, UK productivity was around 19 per cent less than it would have been if the pre-2017 growth rate had continued.
By that, we mean output per hour. Economic output is a product of hours worked multiplied by output per hour. And in the UK output per hour is quite low relative to most other G7 countries.
That is why the French economy is slightly bigger than the UK economy at the moment. The two countries have a similar sized labour force, UK unemployment is much lower, but while less people are employed in France and work fewer hours, they produce more per head.
In fact, productivity growth has been weak across the developed world, if the G7 had grown at the pre-2007 pace, today it would be 10 per cent greater. It’s just not such a big problem as the UK faces.
End of 2017
All changed at the end of 2017. In Q3, output per hour grew by one per cent quarter on quarter, and according to data out last week, it grew by 0.7 per cent in Q4.
If that growth rate can continue it will be good news indeed.
The jury is out on why. Some economists say that hours worked fell during the period in question and that productivity jumped as a consequence.
It should be like this?
But we should expect productivity growth to be surging. After-all we are supposedly in the midst of a fourth industrial revolution.
But it is clear that entrepreneurs have a fix. If the UK was more entrepreneurial, then wouldn’t productivity grow?
There is of course lots of anecdotal evidence to suggest that the UK is more entrepreneurial. Something that is celebrated with The Great British Entrepreneur Awards.
It may be that it began in 2008 when the financial crisis occurred. Many people reacted to the crisis by entering the brave world of entrepreneurship. An ironic side-effect of a crisis that so devastated productivity, is that it created the conditions for an entrepreneur led recovery.
Maybe the jump in productivity in Q3 and Q4 is evidence of a more entrepreneurial Britain.