UK productivity shows sustained recovery, economists say
UK productivity is showing sustained improvement, with output per hour rising 1.1% annually, easing pressure from an ageing population and defence spending.
Britain's economic productivity is showing signs of a sustained recovery, potentially ending a prolonged slump that began with the 2008 financial crisis and deepened after the pandemic.
New estimates from the Resolution Foundation think tank show that annual growth in output per hour averaged 1.1% over the two years to June 2026. This marks a sharp turnaround from a 0.7% annual decline in the previous two years and an average rise of 0.7% in the late 2010s.
"While official figures suggest that the output of workers has worsened further in the mid-2020s, our more accurate productivity measure suggests that it has been improving in recent years," said Simon Pittaway, an economist with the Resolution Foundation.
Measuring productivity has become difficult because the Office for National Statistics' main survey suffered from falling response rates after the pandemic. In June, the ONS recommended using tax data instead, which provides more reliable employee numbers but lacks detail on hours worked and self-employment.
Economists have developed their own estimates. Bruna Skarica, chief UK economist at Morgan Stanley, believes private-sector productivity growth has risen to 1.8% a year, close to pre-crisis levels. She notes similarities with the US, where productivity picked up after the pandemic and has been strong for about three years, though the US improvement began roughly a year earlier.
The role of artificial intelligence in the pickup remains debated. Robert Wood, chief UK economist at Pantheon Macroeconomics, said few British businesses report that AI has reduced staffing needs, except in roles like junior software developers, raising questions about durability.
The Resolution Foundation said the improvement is broad-based, making it easier to rule out causes like reduced employment in less productive sectors due to a higher minimum wage than to identify a single clear driver. "The UK's productivity recovery has been achieved by the same workers, doing the same jobs, and working in the same sectors," Pittaway said.