Productivity Measurement Analysis series – UK Q4 2024 by Ruby Watson and Raquel Ortega-Argilés.
General summary and main figures
On 18 February 2025, the Office for National Statistics (ONS) released its flash estimate of the UK productivity for the fourth quarter of 2024 (October-December). These estimates were based on quarterly estimates of gross domestic product (GDP) and labour market statistics, as well as a productivity overview for Q3 2024. Q4 shows a significant improvement compared to the weak growth seen in previous quarters.
Labour Force Survey (LFS) based estimates indicate output per hour worked increased by 1.6% in Q4 compared with pre-pandemic levels. This growth can be attributed to an increase in gross value added (GVA) of 3.8% and increased hours worked by 2.1% over the same period. “Output per hour worked was lower (negative 0.8%) in Q4 2024 than in the same quarter a year ago. This is because hours worked increased more than GVA (2.2% and 1.4% respectively)”. Output per worker increased by 0.9% compared to pre-pandemic levels. Based on the LFS, market sector output per hour has also increased.
Table 1: Flash estimates of labour productivity. UK Quarter 4 (Oct to Dec) 2023 to Quarter 4 2024.
| Period | Output per hour worked growth rates | Output per worker growth rates | ||||
| Quarter vs 2019 pre-pandemic levels (%) | Quarter-on-year (%) | Quarter-on-quarter (%) | Quarter vs 2019 pre-pandemic levels (%) | Quarter-on-year (%) | Quarter- on-quarter (%) | |
| 2023 Q4 | 2.5 | -0.8 | -0.9 | 1 | -1.1 | -0.4 |
| 2024 Q1 | 2.2 | -0.4 | -0.3 | 2 | 0.4 | 1 |
| 2024 Q2 | 2.1 | -0.7 | -0.1 | 1.9 | 0.5 | 0 |
| 2024 Q3 | 1 | -2.3 | -1.1 | 1.1 | -0.2 | -0.8 |
| 2024 Q4 | 1.6 | -0.8 | 0.7 | 0.9 | -0.1 | -0.3 |
Insights into the Q4 2024 productivity release
As indicated with previous quarterly estimates, the ONS highlighted revising the weighting of the Labour Force Survey (LFS) to include revised estimates on population and migration data. ONS has indicated further revision is due to take place in 2025. This should be considered when analysing the data and figures produced, as it could significantly impact our understanding of the UK’s productivity. Due to low response rates in the LFS in the base quarter of Q4 2023, less emphasis should be placed on the quarter-on-year metric for Q4 2024.
In terms of sectoral contributions, the transport and storage industry made the most significant upward contribution to productivity growth over the last four quarters, primarily due to an increase in Gross Value Added (GVA). Over the same period, the wholesale and retail industry made the largest negative contribution to productivity growth.
The estimates show a clear between-industry effect with an economic shift towards lower-productivity industries, resulting in a negative re-allocation effect for the fourth consecutive quarter. This shift is significant as it indicates a change in the composition of the economy, which can have implications for overall productivity.
As indicated in the latest ONS release on productivity trends, experimental methods using different data sources can be used for comparable measures and, therefore, should be used with caution. These include using Pay As You Earn (PAYE) Real Time Information (RTI) and Labour Force Survey (LFS) data sources. Results from this analysis indicate output per hour and output per worker increased by 1.5% and 0.7% respectively, compared with pre-pandemic levels. This suggests consistency in the trends over the long term.
Quarterly estimates have converged in output per worker. “The RTI increased by 1%, while the LFS decreased by 0.1% when comparing Q4 for 2024 for each series with the same quarter a year ago”. Using RTI data, output per hour grew by 0.3%, “while output per hour using LFS data fell by negative 0.8% in October to December 2024, compared with the same quarter a year ago”.
Discussion
As reported in the Financial Times, GDP grew by 0.1% in Q4 2024, suggesting improved growth from the third quarter but still relatively slow momentum for the economy. Reuters highlighted a partial recovery of productivity in Britain’s economy in Q4 2024 but still a decline compared with the previous year. On top of this, according to ONS statistics, real GDP fell 0.1% in Q4. Though speculative, as we will need to see how the trends develop in the next quarters, explanations regarding the factors influencing the latest productivity figures in the UK can be found in the current economic conditions, which have displayed a more moderate trend in inflation, interest rates, and economic stability compared to previous quarters. A stable and growing economy provides a conducive environment for productivity growth.
Figure 1, produced by TPI Productivity Lab, compares GVA, Hours Worked and Output per Hour worked.
Source: authors’ own elaboration, ONS data
The trends seen in figure 1 show a decline in performance following the 2008 recession, performance then improves and follows a consistent trend until the COVID-19 pandemic in 2020. OPH appears to be the least affected by the shock of COVID-19. Post pandemic appears to have more divergence across the indicators. GVA and Hours Worked seem to return to their original trends.
