Productivity in the UK – a vital measure of economic health – is growing more strongly than official figures suggest, according to analysis from the Resolution Foundation.
The thinktank suggests the chancellor, John Healey, may have inherited an economy finally starting to emerge from the long shadow of the 2008 global financial crisis.
Productivity measures the economic output produced by each worker, and is a crucial determinant of growth.
The Resolution Foundation reconsiders the UK’s recent productivity record, using what it argues is a more accurate snapshot of the workforce than the widely criticised labour force survey.
Simon Pittaway, the thinktank’s principal economist, said: “Britain’s dismal productivity record since the global financial crisis explains a lot of its economic stagnation and weak living standards growth.
“But 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.”
Some economists have argued the potential uptick in productivity has resulted from job cuts in relatively low-skilled sectors such as hospitality and retail, meaning the average worker has become more productive.
However, the thinktank rejects that idea, pointing out that the share of the workforce employed in hospitality is no lower now than it was in the late 2010s, and only just below its post-pandemic peak.
It also suggests the uptick cannot just be AI-related, as it is more widespread across different sectors of the UK economy.
Pittaway said: “Some have suggested that recent productivity gains have been driven by an early AI boom, and workers leaving low-productivity sectors like retail and hospitality. But nether explanation is borne out by the data. Instead, the UK’s productivity recovery has been achieved by the same workers, doing the same jobs, and working in the same sectors.”
after newsletter promotion
The Resolution Foundation’s report was the latest to paint a relatively optimistic picture of the economy, after official figures last week showed the UK was the joint fastest-growing economy in the G7 in the first half of 2026.
John Van Reenen, Rachel Reeves’s former chief economic adviser, recently published a blogpost pointing to a similar productivity rethink by him and his colleagues at the London School of Economics.
Economists at Morgan Stanley said in a recent research note that the UK was now in “an OK place”. In a note titled “The vibes they are a-changin’”, its chief UK economist, Bruna Skarica, pointed out that growth and inflation had been hit less hard than feared by the Iran war, and consumer confidence had reached a two-year high.
Leave a comment