UK productivity was "underestimated"! Growth since the financial crisis revised up to 1.3%, nearly double the old record.

UK productivity was "underestimated"! Growth since the financial crisis revised up to 1.3%, nearly double the old record. New methodology published by the Office for National Statistics (ONS) on Thursday showed that the UK's productivity performance since the global financial crisis was stronger than previously thought, after statisticians found they had overestimated the number of hours people worked. Under the new methodology published by the ONS, output per hour grew at an average annual rate of 1.3 per cent in the decade to 2019, almost double the current recorded rate of 0.7 per cent and closer to the 2 per cent growth recorded in the decade before the 2008 financial crisis. The report further suggests that the UK economy has been more resilient than expected, following months of unexpectedly strong economic growth. This is a major boost for UK Chancellor of the Exchequer John Healey. He will address a difficult fiscal situation in next month's Budget and seek to fill an ever-widening gap in the public finances. This is also the latest revision of data and survey methodology by the ONS. In recent years, the agency has repeatedly had flaws in labour market, price and gross domestic product (GDP) data, ultimately triggering an investigation into the agency, as well as the sudden departure of national statistician Ian Diamond last year for health reasons. His successor was only appointed last week, more than a year after his departure. The new "component method" adopted by the ONS in its productivity statistics produces lower estimates of hours worked by explicitly accounting for annual leave, public holidays, sick leave and other changes in working patterns. The method is based on household and business surveys as well as administrative data. The results show that output per hour in 2024 was 40.7 per cent higher than in 1997, more than 6 points above the previous estimate. The report partly rewrites the narrative of the UK's post-financial crisis productivity. The UK had been seen as experiencing a sharper slowdown than many other advanced economies. The ONS said it had communicated the new methodology to all stakeholders, including the UK Treasury. The component method will become the official productivity measure in November. The ONS report said: "Under the component method, improvements in actual hours worked can explain half of the productivity slowdown since 2008. Therefore, the 'productivity puzzle' remains under both methods, but is smaller under the component method framework." The improved method also shows that during the pandemic, when the furlough scheme mainly applied to low-productivity sectors, the productivity of those still working was close to the pre-2008 trend. The ONS added that these changes do not affect current GDP data. The statistical agency will publish productivity estimates up to the second quarter of 2026 after the annual GDP data set is released later this year, and will then incorporate the new method into its headline productivity data.