Productivity generally refers to labour productivity, although it can be used to compare the effectiveness of plant and equipment and even the performance of buildings. Labour productivity is the quantity or financial value of what is produced per person in a given period of time. As a consequence, the higher the level of productivity, the more that can be produced by a given number of people. In an economy such as the UK’s, productivity tends to increase over time (see Figure 5.1) because of improvements in working practices, machinery and technology, which mean that the economy can produce the same amount with fewer people or a greater quantity of products and services with the same number of people.

Although productivity tends to increase over time, it has remained broadly flat since the global financial crisis in 2008. If productivity had continued to rise at its long-term trend rate seen before the onset of the financial crisis, according to Figure 5.1, UK productivity in 2016 would have been 20 per cent higher than it actually was.

Figure 5.2 shows that there is a considerable difference between productivity growth within sectors in the UK. Productivity has continued to gradually increase in services, which dominate. Productivity in manufacturing grew until the financial crisis of 2008 and has been stagnating since 2011. Productivity in UK construction has been broadly flat over the last 20 years, with marginal growth during the early part of the new millennium offset by the impacts of the financial crisis.

Total productivity in construction is determined by the whole team of people involved in the construction process working together. This includes all those within the supply chain, both on site and off site, and those in architectural design and the professions, major contractors, specialists, SME contractors, builders’ merchants and distributors and those in plant hire and product manufacturing. Labour productivity also depends on the plant and machinery used and the extent to which the production process is capital intensive or labour-intensive. Capital intensity describes a process predominantly based on using a large amount of plant and equipment, whereas a labour-intensive process relies more on workers using their skills and simple tools and equipment.