A new assessment of the UK's recent productivity suggests this critical measure of the country's economic strength may have been systematically underestimated. Instead of stagnation, the assessment points to a "meaningful pickup" in productivity since mid-2024, with annual growth of about 1.6%. This is an increase from an average of 0.3% in the previous decade.
The estimates, from the Centre for Economic Performance at the London School of Economics (LSE), use an alternative dataset based on what companies report to tax authorities through the PAYE system. This differs from the Office for Budget Responsibility (OBR), which relies on the Labour Force Survey (LFS).
The LFS recorded a 377,000 increase in employees since mid-2024, while the tax-based measure shows a decline of 133,000. Using the smaller estimate for the number of employees suggests that productivity has jumped, rather than flatlining.
John Van Reenen, one of the LSE co-authors, stated that "the best current guess does suggest we are getting more out of our workers than we used to." It is too early to determine what may be driving this uplift or if it will be sustained, but one hypothesis is that AI is beginning to yield results in some sectors.
The Office for National Statistics (ONS) withdrew the accredited official statistic status from its LFS in 2024 due to declining response rates. The ONS confirmed last week that it will be November 2027 at the earliest before it could switch to a new, online version of the LFS.