Britain’s economy appears to be turning a corner on productivity, a key driver of living‑standard growth. New estimates released by the Resolution Foundation show that output per hour grew at an average annual rate of 1.1% for the two‑year period ending June 2026, reversing a 0.7% decline recorded in the two years before that.
Why productivity matters
Productivity – the amount of economic output generated per hour worked – underpins higher wages, lower inflation and the ability of the government to fund public services without over‑taxing citizens. With an ageing population and rising defence spending, stronger productivity is essential for Britain’s fiscal health.
New data, new methods
Historically, the Office for National Statistics (ONS) relied on a workers’ survey to gauge productivity. Response rates fell sharply after the pandemic, prompting the ONS in June to shift to tax‑based data, which offers more reliable employee counts but lacks detail on hours worked and self‑employment. Because of these limitations, economists have produced their own calculations.
Simon Pittaway, an economist with the Resolution Foundation, said the organization’s measure is more accurate than the official figures, which still suggest a dip in worker output in the mid‑2020s. “Our data indicate that productivity has been improving in recent years,” he explained.
Private‑sector outlook
Bruna Skarica, chief UK economist at Morgan Stanley, estimates private‑sector productivity growth at about 1.8% annually – close to the pace seen before the 2008 financial crisis. She noted that the United States experienced a similar rebound, though it began roughly a year earlier than Britain’s.
Both analysts point to the growing role of artificial intelligence (AI) in service‑heavy economies. While AI could boost efficiency, its impact remains debated. Robert Wood, chief UK economist at Pantheon Macroeconomics, observed that few British firms report AI reducing staffing needs, except in niche roles such as junior software developers, raising questions about the durability of the gains.
Broad‑based recovery
The Resolution Foundation emphasizes that the productivity lift is not the result of workers shifting from low‑productivity sectors like hospitality or retail – a change sometimes attributed to higher minimum wages. Instead, the improvement comes from the same workers doing the same jobs in the same industries.
“The UK’s productivity recovery has been achieved by the same workers, doing the same jobs, and working in the same sectors,” Pittaway said.
Looking ahead
Economists caution that sustaining the trend will require continued investment in technology, skills training and infrastructure. If AI adoption expands and firms find ways to harness it without large layoffs, productivity could keep rising, echoing the boost seen in the 1990s when computers became commonplace in offices.
For now, the data offers a hopeful sign that Britain may be emerging from a decade‑long productivity slump that began after the 2008 financial crisis and deepened during the COVID‑19 pandemic.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
