What is productivity?

Productivity is not always an easy concept to grasp. In simple terms, it is a measure of the amount of output that a business produces per unit of input. Understanding your productivity levels is key to understanding your business performance.

Why is productivity important?

On a small scale, productivity has a direct impact on individual business success. On a deeper level, it’s effect on the health and prosperity of the UK will be long lasting.

Growing productivity allows businesses to produce more goods and offer greater service. This then creates higher wages, supports economic growth, holds back inflation and increases tax revenues. All this adds up to government being able to provide a greater range of essential services.

22.8%

UK productivity is weaker than France by nearly a quarter. It is one of Britain's biggest economic policy challenges.

What is benchmarking?

Productivity is defined as the ratio between Output and Input.

Output

The measure of output is Gross Value Added (GVA). GVA at the firm-level is often measured using the production approach i.e. Turnover minus Intermediate Consumption. Intermediate consumption is the total purchases of energy, goods, materials and services that are consumed as inputs by a process of production. It excludes fixed assets/capital (e.g. land, buildings, vehicles, machinery and equipment).


Input

The measure of labour input is workers (employees and working proprietors).


Calculating productivity

Productivity =

GVA (output minus intermediate consumption)

Employees (input)

Why should you benchmark your business?

Sometimes it is difficult to know exactly how well your business is performing. Our benchmarking tool helps do this quickly and accurately, making it possible to see how your business compares to similar ones around the UK. With this information you can make informed decisions about the best next steps for the future of your business.

Our benchmarking tool works quickly and accurately. By pulling in data from the Office for National Statistics and Companies House, we can compare your performance with over 48,000 businesses across the UK

Benchmark your business now

Key definitions

Intermediate consumption (Expenses)

Intermediate consumption is the total purchases of energy, goods, materials and services that are consumed as inputs by a process of production. It excludes fixed assets/capital (e.g. land, buildings, vehicles, machinery and equipment).

Gross value added GVA

GVA is the difference between total output and intermediate consumption. That is the difference between the value of goods and services produced and the cost of raw materials and other inputs that are used up in production.

Productivity

Productivity is a measure of the amount of output a business produces for a unit of input. In its simplest form, labour productivity measures the amount of output produced per worker: higher productivity means that a business produces more output for each worker it employs.

Turnover

Turnover consists of total takings or invoiced sales and receipts of the business in connection with the sale of goods and services. Figures should be given gross of indirect taxes, duties and levies (except VAT) invoiced to the customer. Interest and similar income, other operating income and extra-ordinary income should be excluded from the turnover figure as should net proceeds on sales of capital items.

Workers

This definition includes employees and working proprietors. An employee is anyone aged 16 years or over that your organisation directly pays from its payroll(s), in return for carrying out a full-time or part-time job or being on a training scheme. Working proprietors include all individuals and partners actively engaged in the work of the business. It excludes silent or inactive partners whose main activity is outside of the business.

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