Measures of spare capacity in the UK economy have tightened over the last year, with indications of spare capacity being greatest in the labour market. Spare capacity in the manufacturing sector now appears to be below its long run average.
The economic recovery appears to have had an impact on the inactivity rate, which is at its lowest rate since the early 1990s. This appears to have been affected by both increased participation among older workers – and by older female workers in particular – as well as by larger numbers of young people remaining in education during the economic downturn.
Analysis of the input-output analytical tables suggests that production (including manufacturing) was the most internationally orientated element of the UK economy in 2010: importing around a third of goods and services inputs and exporting a similar proportion of production. However, exports played a much larger role for some products, including motor vehicles, pharmaceuticals and aircraft.
Estimates of productivity in the services industry – which accounts for the largest share of UK output and hours worked – suggest that recent weakness is accounted for by several specific sub-industries, including finance & insurance, accommodation & food and transport & storage services. Productivity growth in some sub-industries has now broadly returned to pre-downturn trend rates.
