Britain may be seeing tentative evidence of a long-awaited productivity turnaround after more than a decade of weak performance, according to new analysis from the Resolution Foundation.
The improvement does not yet show clearly in headline official figures, but alternative data suggest output per hour worked has begun to rise at a pace not seen since before the financial crisis. The think tank cautions that the apparent rebound should be treated as an inflection point rather than a confirmed recover
Official productivity figures based on the Office for National Statistics’ Labour Force Survey show growth of just 1.1 per cent in the year to the third quarter of 2025, a modest improvement by recent standards. However, the Resolution Foundation argues that payroll-based data, which economists generally regard as more reliable, tell a more encouraging story.
“Productivity was essentially flat between the pre-pandemic peak of Q4 2019 and post-pandemic trough of Q1 2024, but it has grown by a blistering 3.4 per cent in the six quarters after that, a rate not seen since before the financial crisis.”
The Resolution Foundation said a “blistering” productivity surge has been masked by problems with official statistics, particularly ongoing weaknesses in labour market measurement. It framed the issue as one of data quality rather than political interpretation.
Productivity growth is central to Prime Minister Keir Starmer’s economic agenda, underpinning ambitions to raise living standards and fund public services without sustained tax increases or borrowing.
However, Britain remains some distance from its growth goals. Economists expect GDP growth of 1.4 per cent in 2025, below the US and pre-crisis norms.
The report also points to renewed business dynamism. Creative destruction, long seen as necessary for productivity gains, appears to be re-emerging as higher energy prices, interest rates and wage costs squeeze weaker firms.
“Following post-pandemic volatility, firm insolvencies are now running at rates not seen in a decade, and the share of jobs lost to closing firms in 2024 was the highest since 2011.”