UK productivity shows sustained improvement, economists say
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Britain's economic productivity is showing signs of sustained improvement, economists said on Monday, potentially ending a prolonged slump that began around the 2008 financial crisis. The Resolution Foundation estimates annual growth in output per hour averaged 1.1% over the two years to June 2026, up from a 0.7% annual decline in the prior two years. The improvement may ease fiscal pressures from an ageing population and higher defence spending, even as the role of AI in the pickup remains debated.
Key Facts
- Resolution Foundation estimates annual growth in output per hour averaged 1.1% over the two years to June 2026, up from a 0.7% annual decline in the prior two years.
- Morgan Stanley's Bruna Skarica estimates private-sector productivity growth has risen to 1.8% a year, close to the pace seen before the global financial crisis.
- The Office for National Statistics recommended in June using tax data for its main productivity measure after a fall in survey response rates.
- US productivity growth picked up after the pandemic and has been strong for about three years, roughly a year earlier than Britain's improvement.
Productivity Rebound
Resolution Foundation estimates show annual growth in output per hour averaged 1.1% over the two years to June 2026, compared with an annual decline of 0.7% in the two previous years and an average rise of 0.7% in the late 2010s. Simon Pittaway, an economist at the Resolution Foundation, said official figures suggest worker output worsened further in the mid-2020s, but the think tank's more accurate measure shows improvement in recent years. Bruna Skarica, chief UK economist at Morgan Stanley, estimates private-sector productivity growth has risen to 1.8% a year, close to the pace seen before the global financial crisis. Skarica said the UK is seeing similar trends to the United States, but the US improvement began roughly a year earlier.
Measurement Challenges
The Office for National Statistics' main productivity measure was based on a workers' survey that suffered a big fall in response rates after the pandemic. In June, the ONS recommended using tax data instead, which gives more reliable employee numbers but lacks detail on hours worked and self-employment. Economists have developed their own estimates of productivity growth in response to the survey problems.
AI and US Comparison
In the United States, productivity growth picked up after the pandemic and has been strong for about three years. Skarica expects the improvement to persist in Britain because of similarities with the US economy, including a high reliance on services that might benefit from artificial intelligence. She compared the potential impact to the 1990s, when computers came into widespread use in offices. The extent to which the pickup is driven by AI is a subject of debate among economists.
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UK productivity shows sustained improvement, economists say
