The UK's productivity slowed at its fastest pace for seven years at the end of 2015, according to the Office for National Statistics (ONS).

Productivity, as measured as output per hour, fell 1.2% in the final quarter of the year from the third quarter when a 0.6% rise had been reported. However, compared with the final quarter of 2014, productivity was up 0.4%.

The manufacturing sector suffered the biggest fall in productivity at 2%, whereas the UK's dominant services sector fell 0.7%.

Looking at the whole year, productivity grew 1%, which is the largest rise since 2011, the ONS said.

The ONS said overall productivity, which includes output per hour, output per work and output per job, grew 0.5% between the final quarters of 2014 and 2015.

Sparked by the financial crisis of 2008, the politicians and business experts have regularly been trying to reverse the UK's productivity issue, described as the 'productivity puzzle'. The ONS said worker output per hour was 14% lower than forecast prior to the financial crisis.

Suren Thiru, head of economics at the British Chambers of Commerce, said: "There are deep-rooted structural problems in our economy that have dampened productivity - from skills shortages, to infrastructure bottlenecks and limited growth finance.

"Delivering solutions to these critical issues would go a long way to achieving the productivity gains we need."

Blame the start-ups

Despite widespread focus and praise on the number of new businesses launched in the UK in recent years, new research suggests that they are actually part of the productivity problem.

Although nowhere near entirely to blame, innovation foundation Nesta, found that new companies caused a 2% reduction in overall productivity between 2010 and 2013.

The research is the latest collaboration between Nesta and the National Institute of Economic & Social Research (NIESR) examining the subject of UK productivity, and is based on a detailed analysis of comprehensive firm-level data provided by the Office for National Statistics.

Although Nesta says it is normal for newly established businesses to start out being relatively unproductive and improve over time, the performance on average of the 2010-2013 cohort has been significantly worse than that of their predecessors.

The research also found that the slow growth and stagnation in productivity experienced since the 2008 financial crisis - and the productivity puzzle - is common across many different sectors of the UK economy. This suggests that market-wide factors, rather than industry-specific inefficiencies, may be responsible for the issue.

Stian Westlake, Nesta’s executive director of policy and research said: “The slump in UK productivity since the recession has stumped policymakers and business leaders for some time. As this new research shows, it’s a puzzle that only seems to increase in complexity.

“What’s clear is that recovery has been slow coming. Productivity only reached pre-recession levels late in 2014, and across many industries has virtually plateaued. Part of the reason looks to be that unproductive new companies are actually dragging down overall productivity.

“It’s important to emphasise that these findings don’t mean that we should not support new businesses - which are essential to a thriving economy - but they are a reminder that quality matters more than quantity. What’s important now is that the government starts supporting the most productive new businesses in more targeted and dynamic ways.”