STORY
UK productivity has been growing at an average annual rate of 1.1% over the past two years, according to new analysis from the Resolution Foundation which argues that official figures are understating the improvement. The think tank said its alternative measure showed productivity growth since the third quarter of 2024 had exceeded the average recorded in the late 2010s, while official Office for National Statistics data indicated a 0.2% fall over the same period.
The Foundation said it developed an alternative measure because of continuing problems with the ONS Labour Force Survey following the pandemic, instead using HMRC payroll data and tax returns from self employment. Its analysis found that 12 of 19 sectors had experienced stronger productivity growth over the past two years, including information and communications, retail, science, transport and health. It said the improvement had largely come from higher productivity within individual sectors rather than workers moving out of lower productivity industries such as retail and hospitality.
The report also cautioned against attributing the improvement primarily to artificial intelligence. Although the proportion of businesses reporting some use of AI has doubled from 23% in late 2023 to 46% in June 2026, only around one in 20 businesses said they were using it extensively. Resolution Foundation principal economist Simon Pittaway said the recent improvement was welcome but would need to be sustained if it was to produce significantly stronger economic growth and higher living standards