Key facts
- UK productivity is showing signs of sustained improvement, according to economists.
- Resolution Foundation estimates output per hour grew 1.1% annually over the two years to June 2026.
- This contrasts with a 0.7% annual decline in the preceding two years.
- Morgan Stanley estimates private-sector productivity growth at 1.8% annually.
- The UK's productivity recovery is broad-based and not attributable to specific sectors.
- The role of AI in driving these gains is a subject of ongoing debate.
Britain's economic productivity is showing signs of sustained improvement, potentially marking an end to a prolonged slump that began around the 2008 financial crisis. Economists suggest that output per hour worked has increased, with estimates from the Resolution Foundation indicating an average annual growth of 1.1% over the two years to the end of June 2026. This marks a significant turnaround from a 0.7% annual decline in the preceding two years.
Bruna Skarica, chief UK economist at Morgan Stanley, believes private-sector productivity growth has risen to 1.8% annually, a pace not seen since before the global financial crisis. She draws parallels with the United States, where productivity growth has been strong for approximately three years, and anticipates similar persistence in the UK, potentially driven by factors like artificial intelligence.
However, the extent to which AI is contributing to these gains remains a subject of debate. Robert Wood, chief UK economist at Pantheon Macroeconomics, noted that few British businesses have reported significant staff reductions due to AI, except in specific roles like junior software development, raising questions about the long-term sustainability of the productivity increases. The Resolution Foundation also highlighted that the improvement is broad-based, making it difficult to pinpoint a single driver and ruling out explanations such as reduced employment in less productive sectors due to higher minimum wages.