NEWS / Economy
Revised productivity picture could ease Healey’s crunch, but not in time for Oct. 28
Andre Savage
Published Sep 25, 2026
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Summary:
- The ONS now estimates output per hour grew 1.3% a year in 2010-2019 using a revamped method, versus 0.7% under the old one, largely because Britons worked fewer hours than first thought.
- The Resolution Foundation says the revisions are “hard to ignore” and “challenges a widely held view about Britain’s economic stagnation,” but the OBR is unlikely to change budget assumptions this time.
- Bloomberg Economics reckons Chancellor John Healey’s fiscal buffer has shrunk by about half to roughly £12 billion ($15.9 billion), upping the odds of tax rises or a tighter margin for shocks.
What the numbers changed
Fresh ONS calculations last week recast the UK’s post-crisis productivity story: output per hour is now judged to have advanced by an average 1.3% a year from 2010 to 2019, not 0.7%. That puts the rebound closer to the pre-crisis norm of about 2% a year. The step up mainly reflects the ONS’s updated view that people worked fewer hours than previously recorded. In the ONS’s framing of long run performance, the 1997 to 2007 average is set as 100.
Officials also note signs of firmer productivity in recent years, and optimism around artificial intelligence is adding to hopes of faster gains ahead.
What watchdogs and think tanks say
The OBR leaned on the UK’s weak productivity track record when it cut forecasts last year, tightening an already fragile fiscal backdrop and feeding into Labour’s tax increases. In March, the watchdog penciled in a gradual improvement to around 0.9% annual productivity growth over the coming years.
The Resolution Foundation, a left leaning think tank, said on Friday the issues raised by the revisions are “hard to ignore.” In its words, the fresh data “challenges a widely held view about Britain’s economic stagnation.” It added: “The OBR may need to upgrade its productivity forecast, but not in time for the budget,” and, “The new data means the OBR productivity assumption is more pessimistic than the UK’s post-financial crisis performance.”
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The fiscal referee took flak through the 2010s for repeatedly expecting a pickup that, based on the old figures, never arrived. With the ONS’s overhaul, those projections look less off base. “The OBR’s past predictions of productivity, which were mocked and laughed at mercilessly, actually look rather better now,” said David Miles, a senior OBR official, speaking in London on Thursday.
Timing, fiscal rules and the budget squeeze
The revisions look set to land too late for the OBR to update its working assumptions for the Oct. 28 budget. Healey’s room to maneuver is already tight. Since the US-Iran war, borrowing has become more expensive, eroding his cushion under the government’s rules; Bloomberg Economics estimates his headroom has fallen to about £12 billion.
Under the stability rule, day to day spending and revenues must balance by 2029-30. The OBR’s most recent assessment tied to these rules was released in early March. A thinner cushion raises the chance of further tax measures, or of running the budget with less protection against surprises.
Why this matters for your money
If the OBR revisits its assumptions next year, a brighter productivity path could hand Healey more fiscal space. But for now the near term picture is still tight and the UK continues to lag major peers. As economist Simon Pittaway put it, “We shouldn’t get carried away.
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