UK productivity estimates rise after ONS revises hours worked data

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UK productivity revision

Highlights

ONS revised UK output per hour worked growth to 1.3 per cent annually from 2009-2019, up from the previous 0.7 per cent estimate.
New data sources reveal employees worked significantly fewer hours than previously estimated, raising measured productivity and correcting methodological overstatements.
ONS will adopt a new 'component approach' this year, integrating several surveys to produce more accurate and granular productivity data, impacting investor and policymaker assessments.

Revised methodology changes productivity picture

As reported by Financial Times, citing the Office for National Statistics, output per hour worked increased by an average of 1.3 per cent a year between 2009 and 2019, compared with an earlier estimate of 0.7 per cent. The revision means the UK looks less like an outlier among G7 economies, even though a productivity slowdown after the global financial crisis remains visible.

The ONS says the change stems from improved data sources that better capture annual leave, sickness absence and overtime. Those sources indicate employees were working significantly fewer hours than earlier estimates suggested, which raises measured productivity because output is spread over a smaller number of hours.

Cliodhna Taylor, the ONS’s head of productivity statistics, says long-running debate over the UK’s “productivity puzzle” has included questions about investment, business practices, new technology and measurement issues. The revised data point more directly to problems in how hours worked were being measured, rather than to a fundamentally weaker output record alone.

Survey flaws and broader economic implications

The agency identifies three main weaknesses in the previous Labour Force Survey-based approach. Respondents may struggle to recall actual hours worked, one household member may answer for others, and missing follow-up responses may have been filled in using earlier patterns that overstated time at work, especially when people were away on holiday or otherwise absent.

According to the ONS, falling response rates to the Labour Force Survey increased this upward bias in hours worked over time. That matters because overstated hours depress output-per-hour calculations, making productivity growth look weaker than it really is.

The ONS plans to use a new “component approach” later this year, combining the Annual Survey of Hours and Earnings with annual and quarterly workforce surveys. The agency says the method should better reflect the wider data picture and allow individual elements to be improved as stronger evidence becomes available, with implications for how investors, policymakers and economists judge the UK’s long-term productivity record.

In our earlier article on the ONS revisions to UK productivity measurement, we explained how a new component-based approach uses multiple data sources to better capture hours worked, including annual leave, sickness absence and overtime. The change lifted estimated output per hour (without altering GDP), making the UK’s post-2008 productivity slowdown look less exceptional compared with other advanced economies.

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