Britain’s productivity may have improved significantly over the past two years, with new research suggesting that the economy has been performing much better than official statistics indicate.
The Resolution Foundation said productivity, measured by output per hour worked, has grown by about 1.1% a year since late 2024. That compares with an official estimate of only 0.2% from the Office for National Statistics.
The think tank based its alternative assessment on payroll information from HM Revenue and Customs and tax returns from self-employed workers. It argues that these sources provide a more reliable picture of employment and economic activity than the data currently used in the official productivity calculation.
A separate study by the Centre for Economic Performance, using the same sources, estimated annual productivity growth at 2.37% between the third quarter of 2024 and the first quarter of 2026.
Productivity growth is closely linked to living standards because stronger output from each hour worked can support higher wages and economic growth. It also affects government finances by influencing the amount of economic activity available to generate tax revenues.
The discrepancy has raised questions about the reliability of official productivity figures. The ONS calculates its measure using its Labour Force Survey, which has experienced weaker response rates since the Covid-19 pandemic.
The statistics agency has been working to improve participation and plans to introduce a transformed Labour Force Survey. The new system is expected to become the main source for headline labour market statistics from 2027.
The issue is important for policymakers because productivity estimates influence decisions on interest rates, wages and the amount of money available to governments for public spending.
Britain has experienced particularly weak productivity growth since the 2008 financial crisis. Average annual productivity growth stood at about 2.1% during the decade before the crash but has fallen to around 0.3% in the years since, according to figures cited by the Resolution Foundation and the Office for Budget Responsibility.
The foundation also examined possible reasons for the recent improvement. It found little evidence that the gains were primarily driven by artificial intelligence or workers moving away from low-productivity industries.
Instead, the improvement appears to have been spread across the economy. Twelve of 19 sectors recorded stronger productivity growth over the past two years, including information and communications, retail, transport, health and scientific services.
Simon Pittaway, principal economist at the Resolution Foundation, said the recovery appeared to involve workers remaining in the same jobs and sectors while producing more output.
The foundation said the improvement was encouraging but warned that sustained productivity growth would be needed for it to produce substantial gains in household living standards.
