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Concerns about the economy as public sector productivity continues to fall | Business News

Official figures have sparked fears that the public sector could pose a greater hindrance to Britain’s economic recovery from recession.

Data from the Office for National Statistics (ONS) showed productivity in the public sector, dominated by education and healthcare, worsened between the third and fourth quarters of 2023.

There was a 1.0% decline in the period, which was 2.3% lower than a year ago and further away from the recovery to pre-pandemic levels.

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The gap was estimated at 6.8%.

Public sector productivity measures the volume of services provided relative to the volume of inputs – such as salaries and government resources – required to maintain those services.

While the sector has been hit by the impact of strikes since the end of the COVID crisis, the NHS has struggled to deal with an ever-worsening backlog on many key waiting lists.

The dispute over funding has been exacerbated by record numbers of long-term illnesses.

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The official unemployment rate is just over 4% – around 1.4 million people.

However, the number of people considered inactive due to poor health is almost twice as high.

The Office for Budget Responsibility estimates the issuance added around £16 billion to annual government debt.

The pressure was reflected in the ONS data, with output in both the health and education sectors falling in the fourth quarter of the year, contributing to the country’s recession.

This occurred despite increasing inputs over the period.

Back in March, Chancellor Jeremy Hunt used his Budget to announce a public sector productivity plan – with a focus on improving technology in the National Health Service (NHS).

Figures next week are widely expected to confirm the end of the recession and overall output will return to growth in the first quarter of the year.

Recent private sector surveys have painted a rosy picture for the dominant services sector, which accounts for nearly 80% of total output, although budgets remain under pressure due to the impact of higher inflation and interest rates intended to help address the price problem.

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