What is now revealed to have been the deep recession of the first quarter of 2009 drove up industry’s wage costs by more than ten per cent year-on-year, while profitability sank to a 17-year low.

The leap in wage costs measured by unit of output to some extent reflected a reluctance to dismiss skilled workers, who might be needed if the slump in demand proved short-lived.

But it was also sudden. This measure of labour costs leaped by 7.3 per cent between the final months of 2008 and January/March this year, National Statistics reported yesterday.

Productivity suffered across the whole economy, as output per worker fell by 4.2 per cent on the same months last year and by 1.8 per cent from the previous quarter.

In terms of output per hour worked the decline was slightly less acute – 2.4 per cent on the year and 1.6 per cent quarter on quarter.

Within this, manufacturing productivity fell by 8 3 per cent year on year, on the basis of output per job and by 3.7 per cent quarter on quarter.

Profitability suffered accordingly. The net rate of return for manufacturers tumbled to 6.8 per cent, a level not seen since the recession year of 1992, while that for services was down to 13.8 per cent, a 15-year low.

“While the rate of economic contraction has clearly eased substantially recently and the economy may even have stabilised in the second quarter, this is unlikely to be sufficient to prevent further deterioration in profitability,” warned Howard Archer, UK economist at IHS Global Insight.

“Companies’ weakened profitability is likely to weigh down on investment and employment.”

Separate, more up-do-date, numbers from NS confirmed that output among service suppliers has steadied since the early months of this year.

It fell by only 0.1 per cent in April after a 0.2 per cent decline in March.

As a result, the three months to April taken together saw a fall of 1.2 per cent in output of services generally, less than at any time since last December and down from a 1.6 per cent fall in the three months to March.