Britain may be experiencing a genuine revival in productivity growth, according to new analysis from the Resolution Foundation, offering an encouraging sign for the UK economy after years of weak performance.
The think tank’s latest Macroeconomic Policy Outlook finds that, using more reliable administrative employment data, output per hour grew by an average of 1.1% a year in the two years to the second quarter of 2026.
That marks a sharp turnaround from an average 0.7% annual decline in the previous two years and is also stronger than the 0.7% annual productivity growth recorded in the late 2010s.
The Resolution Foundation argues that the improvement is not simply the result of lower-productivity sectors shrinking or employers cutting low-paid jobs.
Its analysis found that 12 of the UK’s 19 main sectors contributed to the improvement, with most of the increase coming from stronger productivity within individual industries.
The report says:
“The revival of productivity looks as mysterious as its fall. But it looks genuine.”
Researchers also found little evidence that the improvement was being driven by the disappearance of lower-paid jobs. Instead, workers across a broad range of sectors appear to be producing more per hour.
The findings are important because productivity — how much economic output is produced for each hour worked — is one of the central drivers of higher wages, stronger living standards and sustainable economic growth.
However, the Resolution Foundation cautions that Britain still has considerable ground to make up.
Productivity remains well below the trajectory expected before the pandemic, with the think tank estimating that output in the second quarter of 2026 was around £150 billion a year below the level implied by the Office for Budget Responsibility’s final pre-Covid forecast.
The recent improvement has also been helped by weaker growth in hours worked rather than a major acceleration in GDP. Nevertheless, the Foundation concludes that the scale and breadth of the productivity improvement goes beyond what would normally be expected simply from a cooling labour market.
Ibrahim Dogus welcomed the findings, saying they offered grounds for optimism about the direction of the British economy.
Dogus said:
“This is an encouraging sign for businesses, workers and families across the country. Britain has faced an exceptionally difficult period, but stronger productivity shows that the fundamentals can move in the right direction.”
He added:
“For small and medium-sized businesses in particular, sustained productivity growth can mean higher wages, stronger investment and more confidence to expand and create jobs. The challenge now is to build on this progress by backing businesses, investing in skills and infrastructure and creating the conditions for long-term, broad-based growth.”
The Resolution Foundation says it is too early to conclude that artificial intelligence is responsible for the improvement. While almost half of UK businesses are using AI in some form, only around one in twenty report using it extensively.
The report therefore leaves open the question of precisely what is driving the recovery, but its overall conclusion is significant: measured using the most reliable available data, Britain’s productivity performance appears to have turned a corner.
For the Government, sustaining that improvement will now be central to its ambitions to raise living standards, strengthen public finances and deliver stronger economic growth.
