The UK economy is struggling amid a cost-of-living crisis with millions of households in economic hardship. The leadership changes at government level have raised discussion on how the economy can be kickstarted.
An area which has been highlighted is the UK’s low productivity levels. Nothing is more important to a nation’s prosperity, to improving living standards, boosting growth, and taming inflation than strong and sustained productivity growth. Historically, UK labour productivity has grown by around 2% per year but since the 2008 recession it has stagnated.
The UK experienced no productivity growth between the first and second quarters of 2022. Figures released by the Office for National Statistics (ONS) show that between the first three-month period in 2022 and the second, productivity in the UK stagnated.
While output per hour worked in the second quarter was 1.7% higher than pre-coronavirus pandemic levels, output per worker fell by 0.6 % indicating that the growth in output per hour was because more people entered the workforce.
In comparison to other countries, UK productivity is around 15% below the US and France. The UK government should look at initiatives to improve productivity levels through a new economic strategy but there should also be an onus on individual businesses to improve their own productivity.
Impact of financial stress
Businesses should assess why their employees are being less productive in the workplace. This can range from the time employees spend on commuting to and from work, a poor working environment, inadequate training of staff members and not placing the right people with the right skills in the right roles. There could also be process issues which hamper workers from working more efficiently which impact productivity levels.
While there may be varying factors, one which shouldn’t be overlooked is the impact of an employee’s financial wellbeing on their productivity. A study published this year, revealed that businesses are suffering a drop in productivity due to employees feeling the burden of financial stress.
The study took evidence from 2,200 employees and found 71% of professionals are experiencing moderate to high levels of stress. The survey shows the cost-of-living crisis is causing those who experience financial stress to feel fatigued. 48% of those experiencing financial stress report terrible sleep quality and 47% say this is leading to anxiety. All of which is influencing negatively on employee’s productivity.
This backs up previous findings by Close Brothers in the 2019 Financial Wellbeing Index which highlights that 94% of employees worry about money and 77% say this affects their work. This equates to 25 million people in the UK affected by money worries at work, which can only be expected to increase as the cost-of-living crisis continues.
Worryingly, 89% of larger UK businesses are impacted by employee wellbeing. Businesses not only suffer from reduced productivity but can be impacted by a loss of talent, increased short-term and long-term absences and higher healthcare costs.
The impact of poor productivity due to stress and financial wellbeing is not just a UK phenomenon. In Australia, an Impact Economics and Policy report found that lost productivity due to poor mental health in New South Wales could amount to $7.5bn if more is not done to support workers. This highlights the potential losses which poor productivity can have on the economy.
How companies can help through flexible pay
UK companies can improve their own productivity levels and support their workers by enhancing employee’s financial wellbeing. A way in which this can be achieved is by offering employee’s more frequent and flexible pay.
This would give employees greater control over cashflow and allow for more efficient budgeting. It would also reduce the likelihood of people using loans and credit meaning concerns about long-term debt are lessened.
A flexible payment policy would allow employees to choose how they access their wages on either a monthly, weekly, or daily basis. Pay day can be any day. Fintech’s which offer flexible pay also provide supporting financial data, such as real-time wage updates which can help employees manage their monthly budgets.
Employers would also benefit as enhanced employee wellbeing improves productivity. They can also help attract and retain talent at a time when competition for talent is fierce. Flexible pay can also reduce absenteeism. This makes business more efficient and ultimately more profitable. At Macro-level, businesses improving their productivity will in turn help the UK improve its productivity growth.
