Productivity flash estimate and overview, UK: January to March 2024 and October to December 2023

Flash estimates of labour productivity for Quarter 1 (January to March) 2024

• Preliminary estimates based on the Labour Force Survey (LFS) indicate output per hour worked increased by 0.1% in Quarter 1 (Jan to Mar) 2024 compared with the same quarter a year ago.

• Preliminary estimates of output per worker indicate an increase by 0.8% in Quarter 1 2024 compared with the same quarter a year ago.

• The preliminary estimates of output per hour and output per worker increased by 1.7% and 1.5%, respectively, when compared with pre-coronavirus (COVID-19) pandemic levels (2019 average level).

As reported in our recent Labour market transformation update, the weighting for the Labour Force Survey (LFS) is being considered in order to reflect the most up-to-date population and migration data. The results in this publication for Quarter 1 (Jan to Mar) 2024, while consistent with labour market data from our Labour market overview, UK: May 2024, should be considered in the light of this and alternative sources of labour market data. It should also be noted that, as migration may affect the composition of the labour force, there may be corresponding impacts on measures of average hours.

Given these caveats, in Quarter 1 2024, output per hour worked, our headline measure of labour productivity, was 0.1% higher than the same quarter a year ago. Output per hour worked increased because gross value added (GVA) increased by more (0.2%) than hours worked (0.1%) compared with the same quarter a year ago.

Output per hour worked was 1.7% above its pre-coronavirus (COVID-19) pandemic levels (2019 average level) in Quarter 1 2024. This growth was caused by an increase in GVA of 2.0% since 2019, while the number of hours worked increased by 0.3% over the period, shown in Figure 1.

While the pandemic had a significant short-term effect on the growth rate of productivity, unlike most “standard” recessions that show a subsequent fall in productivity (such as the financial downturn in 2008 to 2009), the growth rate bounced back to the trend rate. In more recent quarters, however, it has slowed and begun to diverge from the trend extrapolated from the 2009 to 2019 period, shown in Figure 1. This latter trend was historically weak and recognised as the “productivity puzzle”. The recent movements in productivity since the pandemic suggest this underlying weakness in UK productivity growth remains.

Output per worker was 0.8% above its equivalent in Quarter 1 2023, shown in Figure 2. This is because GVA increased by 0.2%, while the number of workers, as measured by the LFS, fell by 0.6%.

Output per worker was 1.5% above its pre-coronavirus level. This was caused by the growth in GVA of 2.0% being higher than the growth in the LFS number of workers of 0.5%.

The contribution to growth in output per hour worked for 19 industries in Quarter 4 (Oct to Dec) 2023, relative to the same quarter a year ago, is shown in Figure 3.

The manufacturing industry made the largest upward contribution to productivity growth over the last four quarters. By contrast, over the same period, the business services industry made the largest negative contribution to productivity growth. The transport and storage, energy, real estate, construction, and hotels and catering industries did not make any substantive contribution to productivity growth over the same period.

Whole-economy growth in productivity is affected by reallocation of economic activity between industries (the between-industry effect). The between-industry reallocation made a negative contribution to productivity growth over the past year, showing that, on average, economic activity tended to shift from industries with higher productivity to industries with lower productivity.

The decomposition of growth of output per hour worked is shown in Figure 4. In the recreation and culture, administrative services, and manufacturing industries, growth in output per hour worked was caused by an increase in gross value added (GVA) and a fall in hours worked.

Gross value added (GVA)

The value generated by any unit engaged in production and the contributions of individual sectors or industries to gross domestic product (GDP).

Labour productivity

Labour productivity measures how many units of output are produced for each unit of labour input and is calculated by dividing output by labour input.

Labour inputs

The preferred measure of labour input is hours worked (“productivity hours”), but workers and jobs (“productivity jobs”) are also used.

Output

Output refers to gross value added (GVA), which is an estimate of the volume of goods and services produced by an industry and in aggregate for the UK.

We welcome feedback about our publication changes. To help us meet user needs, please email productivity@ons.gov.uk.

Methodological information

Productivity estimates and their inputs are produced to a number of decimal points as reported in the accompanying datasets. However, within the bulletin we have rounded to one decimal point.

Flash estimates for Quarter 1 (Jan to Mar) 2024 in this release use the first available information from our GDP first quarterly estimate bulletin and labour market data from our Labour market overview, UK: May 2024 to determine output for Quarter 1 2024. These data may be revised when we release the next publication. The labour productivity estimates by industry section and the datasets are produced by using the GDP quarterly national accounts and reweighted LFS data up to Quarter 4 (Oct to Dec) 2023.

More information on the differences between flash estimates for Quarter 1 2024 and data for Quarter 4 2023 can be found in our Labour productivity Quality and Methodology Information (QMI). Information on the National Accounts Revisions Policy can be found in our National Accounts Revisions Policy: updated December 2023 methodology. Further information on the Labour Market Revisions Policy can be found in our Revisions policies for labour market statistics methodology.

On 2 November 2023, the Office for National Statistics (ONS) published its Labour Force Survey: planned improvements and its reintroduction methodology to enable the reintroduction of the Labour Force Survey (LFS) following its suspension in October, when falling response rates led to increased data uncertainty. Following the development plan, we published our Impact of reweighting on Labour Force Survey key indicators: 2024 article on 5 February 2024. On 13 February 2024, the labour market publication reinstated reweighted LFS. This publication uses the latest reweighted LFS data.

The reweighting exercise has improved the representativeness of our LFS estimates for the period July to September 2022 onwards, reducing potential bias in our estimates.

Productivity data in this release reflect reweighted LFS data consistent with our Labour market overview, UK: May 2024 bulletin. Whole economy estimates of workers are in line with the A05SA dataset released on 14 May 2024 in our Labour market overview, UK: May 2024 bulletin. Whole economy estimates of total hours have been adjusted back to mid-2011 to ensure that headline productivity statistics can be assessed without a discontinuity, for the purposes of the productivity estimates, and are not part of the labour market release. The adjusted productivity hours worked diverge slightly from estimates of hours worked in the HOUR01SA dataset, in time periods from 2011 to 2022.

We have also taken a new approach to reduce volatility in our industry estimates. We only include industry sections; there is no division level and bespoke industry level. The imputed rental is excluded from “Industry L: real estate” and for “Industry B: mining and quarrying”, employee average hours are calculated at section level.

New estimates of gross value added (GVA) are more volatile on a quarterly basis, especially in production industries. This reflects the use of new data and methods, but also challenges in reconciling quarterly and annual data, as explained in our Recent challenges of balancing the three approaches of GDP article. As productivity is a structural feature of the economy, we continue to advise users to focus on long-term trends of productivity.

Information on the strengths and limitations of the labour productivity data, as well as the quality and accuracy of the data, is available in our Labour productivity Quality and Methodology Information (QMI).