Productivity growth was stronger than first thought

By the Editorial Team · Friday, September 18, 2026

The Office for National Statistics has revised UK productivity growth between 1997 and 2024 upward to an average of 1.3 percent per year, reflecting a 41 percent increase in output per hour compared to 1997. Although this update lessens the severity of the UK's productivity slowdown since 2008, the persistence of weak growth continues to influence fiscal policies and economic outlooks, with cautious interest rate decisions expected from the Bank of England.

Britain’s productivity growth between 1997 and 2024 has been revised upward, according to new data from the Office for National Statistics (ONS). The agency’s updated calculations indicate that output per hour of work increased by an average of 1.3 percent annually during this period, slightly higher than the previous estimate of 1.1 percent.

The revised figures were produced using a new methodology that incorporates data from HM Revenue & Customs on payrolled employees, combined with results from other job surveys. This approach aims to address accuracy challenges linked to declining response rates in the ONS’s labour force survey, which formed the basis of earlier productivity estimates.

Under the updated measurement, output per hour is now considered to be 41 percent higher than it was in 1997, compared with a 34 percent increase under the former methodology. Despite this upward revision, the ONS acknowledged that Britain’s longstanding “productivity puzzle” persists, though in a somewhat less pronounced form. Productivity growth has notably slowed since the 2008 global financial crisis, a trend shared by other G7 economies, and this slowdown has contributed to weaker GDP expansion and stagnating living standards.

Cliodhna Taylor, head of productivity statistics at the ONS, said the data continue to suggest a fundamental change in the UK economy following the financial crash. The Office for Budget Responsibility (OBR) reflected this outlook in its forecasts released alongside Chancellor Rachel Reeves's November 2025 budget, where it downgraded productivity growth projections. This downgrade contributed to policy decisions including tax increases aimed at bolstering fiscal capacity.

Recent ONS reports have hinted at tentative signs of renewed productivity improvement, with some economists attributing this potential turnaround to increased investment in and adoption of artificial intelligence (AI) technologies by UK businesses.

The Bank of England expects the UK economy to have grown by 0.4 percent in the third quarter of 2026, supported by higher-than-anticipated monthly output figures earlier in the year. However, the Monetary Policy Committee (MPC) remains cautious on raising interest rates, contrasting with other major central banks that have continued tightening cycles. Rob Wood, chief UK economist at Pantheon Macroeconomics, noted the MPC’s concern about inflation risks, suggesting a rate increase in November is probable unless there is a significant drop in energy prices, with a further hike anticipated in February. The MPC’s next policy meeting is scheduled for November 5.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.