Well directed investment is a key driver of productivity. The very sharp drop in investment in the crisis and the years immediately afterwards cast a shadow that has certainly damaged productivity growth in the recovery. Again the damage to the banking system will have played a part here. If business investment had continued to grow at its pre 2007 average, capital per worker would now be around 5% higher. Firms’ investment intentions are strong at present and the MPC expects business investment to continue to grow strongly over the forecast period. That should increase capital per worker and therefore productivity, albeit with a lag And lastly, productivity over the last two years is likely to have been held back by changes in the composition of the labour force towards lower-skilled and lower productivity occupations. This has almost certainly had something to do with the very fast draining of the reservoir of labour supply that we have seen over the past few years. The rate of decline in unemployment is slowing noticeably now and the level of participation and hours worked seems to be getting close to their trends. So the headwind to productivity from the change in the composition of the labour force should diminish over the next few years. I have given some of the reasons why we expect productivity growth to pick up over the next few years. To be clear, we are not forecasting a sustained burst of high productivity growth but a rather more modest pick up.
Jon Cunliffe: Pay and productivity – the next phase Speech by Sir Jon Cunliffe, Deputy Governor for Financial Stability of the Bank of England, at the Automative Fellowship International dinner, Luton, 22 June 2015. *  *  *  Between 2000 and 2007, the average worker in the UK automotive manufacturing industry produced 7.7 vehicles a year. Over the past seven years he/she averaged 9.8 vehicles a year. Productivity – output per worker – in car manufacturing has increased by 30% since the onset of the great financial crisis. Britain has become the fourth-biggest vehicle maker in the EU and is more efficient than bigger producers such as Germany and France. It has not all been plain sailing. In the recession, productivity in the car industry fell as firms cut back production and held on to workers. But productivity in the industry recovered quickly. If productivity in the UK economy as a whole had grown in the same way as in the car industry, and employment generally had grown as it did, the economy would now be 30% or £ trillion larger than it is today. Annual GDP per person would be about £ higher than it is. Unfortunately productivity in the UK has not followed the lead of the car industry. Indeed, the opposite is true. In 2014 labour productivity in the UK was actually slightly lower than its 2007 level. In the seven years between 2000 and 2007 labour productivity grew at an average annual rate of about 2% a year.