UK productivity growth has staged a marked recovery over the past two years, according to new Resolution Foundation analysis that suggests the economy is performing better than traditional labour market measures imply.
The think tank’s Macroeconomic Policy Outlook: Q3 2026 found that output per hour grew by an average 1.1% a year in the two years to June quarter end, reversing an average 0.7% annual decline during the preceding two years. Growth has also exceeded the 0.7% annual rate recorded between 2016 and 2019.
The Resolution Foundation bases its preferred measure on HMRC administrative data rather than relying primarily on the Labour Force Survey, which has suffered from declining response rates. Its estimate is supported by the ONS Workforce Jobs measure, which also shows productivity growing at 1.1% annually over the period.
The latest ONS administrative-data estimate separately showed output per hour 0.7% higher year-on-year in June quarter, while output per worker increased 1.4%. The ONS recommends its PAYE Real Time Information-based approach as the best current measure of changes in labour productivity.
Importantly, the Resolution Foundation found the recovery was broad-based, with 12 of 19 major sectors contributing to the improvement. Most of the increase came from workers becoming more productive within sectors rather than jobs shifting away from lower-productivity industries.
However, Britain still has considerable ground to recover. The Foundation estimates output per hour remains around 5% below its pre-pandemic trajectory, equivalent to roughly £150 billion of lost annual output, or £4,500 per worker.
