European businesses 'seeing declining productivity levels'

Businesses in Europe are currently suffering from a decline in employee productivity, according to a new report.

Analysis from PricewaterhouseCoopers (PwC) has revealed that productivity saw a sharp drop in 2011 following a stable period from 2006 to 2010, with the trend being driven by a rise in employee costs.

This is due to companies cutting back on their recruitment of younger, lower-grade workers during the recession, leaving them with a high proportion of experienced staff commanding greater pay.

It means that firms are getting a much lower return on investment from their staff, which is problematic at a time when they are seeing little or no revenue growth.

Richard Phelps, human resource services partner at PwC, said: "The difficult job market means many experienced workers are staying longer in jobs, leaving companies struggling with top-heavy structures, little staff turnover and rising wage bills."

Earlier this month, the GfK Consumer Climate Europe and USA survey demonstrated that the ongoing bank crisis is continuing to impair business prospects across the EU.