Revised data points to 1.6% gain
The UK has recorded a rare burst of productivity growth, according to new analysis showing the economy has been stronger than previously believed.
The Resolution Foundation said output per hour worked rose 1.6 per cent over the past year – a sharp contrast with earlier official data that suggested a 0.5 per cent decline.
The think-tank’s assessment is based on revised GDP figures and payroll employment data from tax records, which it argues give a more accurate picture than the Office for National Statistics’ labour force survey, recently criticised for reliability issues.
The improvement marks one of the fastest gains since the 2008 financial crisis, outpacing the post-pandemic average of 0.1 per cent.
However, the Foundation warned that the short-term uptick would not spare Chancellor Rachel Reeves from an expected downgrade in long-run productivity forecasts by the Office for Budget Responsibility (OBR) in next month’s November 26 Budget.
Fiscal implications for Reeves
The OBR currently assumes annual productivity growth of 1 per cent, but the Resolution Foundation expects that figure to be cut to 0.8 per cent – a change that would cost the Treasury around £15 billion a year, equivalent to a 2p rise in the basic rate of income tax.
“Despite the recent pick-up, the UK’s long-standing productivity problems show that a markdown is justified,” said Greg Thwaites, the Foundation’s research director.
Reeves, who is in Washington this week for IMF and World Bank meetings, is pushing pro-growth measures and regulatory easing ahead of the Budget to counter the potential downgrade.
