UK productivity showing sustained improvement, economists say

Britain’s economic productivity is beginning to display signs of sustained improvement, according to economists, potentially signaling the end of a prolonged productivity slump that started around the 2008 financial crisis and arguably worsened post-COVID-19 pandemic. Rising productivity — the amount of economic output generated per hour worked — plays a crucial role in boosting living standards and offsetting fiscal headwinds stemming from an aging population and increased defense spending.

Recent estimates from the Resolution Foundation think tank revealed that annual growth in output per hour had climbed to an average of 1.1% over the two years ending June 2026, up from a decline of 0.7% in the preceding two years and an average increase of 0.7% in the late 2010s. Although official figures suggest that workers' output has worsened further in the mid-2020s, a more precise productivity measure indicates that it has been improving in recent years, said Simon Pittaway, an economist with the Resolution Foundation.

The Office for National Statistics’ primary productivity measure has been hampered by a significant drop in survey response rates following the pandemic. Subsequently, the agency suggested using tax data, which offers more reliable employee figures but lacks details on hours worked and self-employment. Economists have independently calculated productivity growth rates.

According to Bruna Skarica, chief UK economist at Morgan Stanley, private-sector productivity growth has accelerated to 1.8% per year, nearly matching the pre-global financial crisis pace. Skarica noted that the UK's improvement mirrors trends observed in the U.S., though she pointed out that the U.S. started improving roughly a year earlier than Britain.

In the United States, productivity growth has picked up since the pandemic and has been robust for roughly three years. Similar economic patterns, such as a heavy reliance on services that could benefit from artificial intelligence, suggest that the productivity uptick in Britain could endure, much like the 1990s when computers became widely used in offices.

However, the extent to which the improvement is driven by AI remains a topic of debate. Robert Wood, chief UK economist at Pantheon Macroeconomics, observed that few British businesses reported that AI had reduced staffing requirements, except in a few roles such as junior software developers, raising questions about whether the productivity gains would be sustainable.

The Resolution Foundation highlighted that the productivity recovery is broad-based, making it easier to dismiss potential causes like reduced employment in unproductive sectors like hospitality and retail due to higher minimum wages over a single clear driver. The UK’s productivity rebound has been driven by the same workers performing the same jobs in the same sectors, according to Pittaway.