The UK is enjoying an unusual burst of productivity growth, with new data suggesting GDP has been stronger than first reported while employment has slipped. Analysis by the Resolution Foundation indicates output per hour worked rose by 1.6% over the past year, a sharp reversal from official figures that showed a 0.5% decline.
The think-tank’s estimate draws on recently revised GDP data and payroll employment figures from HMRC tax records. It avoids the Office for National Statistics’ troubled Labour Force Survey measure of hours worked, which has faced reliability issues. However, HMRC records do not capture hours, so the results should be treated carefully.
Even with that caveat, the picture looks better than the post-pandemic average of 0.1%, ahead of the 0.5% average seen in the decade after the global financial crisis. A sustained improvement in productivity would lift growth and living standards, bolster tax receipts, and ease pressure on public services.
Yet the Resolution Foundation cautions that Chancellor Rachel Reeves is still likely to face a downgrade to long-run productivity in the Office for Budget Responsibility’s forecasts at the 26 November Budget, widening the fiscal gap she must address. The OBR assumes average annual productivity growth of 1% over its five-year horizon.
As Reeves travels to Washington for the IMF and World Bank meetings, she pushes pro-growth measures, including targeted deregulation, to offset a potential OBR downgrade and support the UK’s medium-term prospects.
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