Q3 2025: UK Productivity Shows Minimal Gains

Correction - Figures 1,2,3 and 4 have been updated due to an error in the ONS Flash Estimate release - more information is provided here

Productivity Measurement Analysis series – UK Q3 2025

by Nathan McKeogh and Raquel Ortega-Argilés

General summary and main figures

On the 13th of November 2025, the Office for National Statistics (ONS) released its flash estimate of UK productivity for the third quarter of 2025 (July to September). These estimates are based on quarterly estimates of gross domestic product (GDP) figures and labour market statistics. Additionally, the release includes data for Q2 2025 regarding sectoral labour productivity.

According to the Labour Force Survey (LFS) estimates, output per hour worked increased by 3.1% and output per worker rose by 2.1% when compared with pre-pandemic levels. This productivity growth resulted from gross value added (GVA) increasing by 6.1% and a 2.9% rise in hours worked.

The estimates reveal that UK productivity is 1.1% higher than in Q3 2024, showing continued stagnation in productivity. This stagnation is attributed to a 1.3% increase in GVA and a 0.2% rise in hours worked.

Table 1: Flash estimates of labour productivity. UK Quarter 3 (July to September) 2024 to Q3 2025

Output per hour growth rates

Output per worker growth rates

Sectoral contributions for Q2 2025

In terms of sectoral contributions, consistent with Q1 2025, the Information Technology (IT); Professional, Scientific and Technical Activities; Manufacturing; and Construction industries were the biggest drivers of productivity growth, delivering the most significant upwards contributions compared to the average levels in 2019. The most substantial growth came from the IT industry at 2.5%, with this increase driven by GVA rising faster than hours worked, resulting in an improvement in output per hour. This sector has maintained a strong upward trajectory, benefiting from advancement and adoption of AI and cloud computing technologies.

On the other hand, the Financial and Insurance Activities sector made the largest negative contribution of -1.2%. This decline was driven by a fall in GVA alongside an increase in hours worked. The drop in GVA is attributed to intermediate consumption rising at a faster rate than output, which lowers the industry’s overall value added.

Similarly, although output in the Human Health and Social Work sector rose, it experienced a –0.9% decline in productivity. This reduction was primarily driven by a rise in hours worked, which offset the gains in output and reduced productivity overall.

In order to illustrate these effects, two figures are provided. Figure 1 shows the contributions to output per hour (OPH) growth by industry, with bar widths scaled to reflect the relative size of each industry. The Financial and Insurance Activities, as well as Human Health and Social Work sector, faced the largest contractions. Together, these industries account for a substantial share of the UK economy (17.32%), meaning that declines within them have a considerable impact on the UK’s overall economic performance. The sectors experiencing both the strongest growth and the sharpest declines are also among the largest contributors to UK output, increasing the economy’s vulnerability to sector-specific fluctuations. Figure 2 illustrates the changes in output per hour worked, GVA and hours worked for each industry in 2025 compared to 2019.

Figure 1: Contribution to growth of output per hour worked by industry, percentage points, Q2 2025 compared with 2019 average, with width of the bar representing relative size of industry. Data Source: Office of National Statistics, Own elaboration by TPI Productivity Lab

Figure 2: Industry Breakdown: Output per Hour, GVA and Hours worked changes, Q2 2025 compared with 2019 average. Data Source: Office of National Statistics, TPI Productivity Lab reproduction of Office of National Statistics figure

The trends observed in Figure 2 highlight how shifts in labour allocation and industry dynamics shape significantly influence overall productivity. The estimates show a clear between-industry effect, with economic activity continuing to move toward lower-productivity sectors. This has resulted in a negative reallocation effect for the seventh consecutive quarter. This shift is noteworthy, as it points to a change in the economy’s composition that may shape the UK’s future productivity performance.

The sectoral decomposition effects play a key role in influencing economic policy, as they highlight which industries contribute to productivity growth and which may require policy intervention. Some potential implications of these figures may emphasise the momentum in investment in innovative, high-growth sectors. Encouraging digital adoption and supply chain optimisations in wholesale, as well as improving workforce allocation in healthcare, could be targeted industrial strategies to consider for improving sectoral efficiency in the less productive UK sectors.

Experimental methods

As indicated in the ONS Q1 release on productivity trends, experimental methods can be used to generate estimates. This includes incorporating Pay As You Earn (PAYE) Real Time Information (RTI) and Labour Force Survey (LFS) data sources. It is important to note that RTI data is only available from Q3 2014 onwards and does not include information on self-employment (SE). Therefore, LFS self-employment data is appended to the RTI data to produce more accurate and comparable estimates.

No adjustments are made for individuals who are employed but not part of PAYE. To avoid double counting when using the LFS for self-employed, working proprietors are removed. Working proprietors, defined as self- employed individuals who are employees of their own firm, make up 10% of all self-employed workers in the UK.

Since these methods are experimental, results from these data sources should be interpreted with caution. According to the LFS, output per hour worked shows growth of 2.1%, while RTI data sources suggests growth of 3.7%. With the LFS, output per hour saw a 3.1% growth compared to a 4.7% growth using RTI. These results suggest consistency in the trends over the long term.

Figures 3 and 4 illustrate these comparisons, showing data for the periods of Q1 2015 to Q1 2019 and Q3 2021 to Q3 2025 side by side. The intermediate period of Q2 2019 to Q2 2021 has been omitted to highlight the differences between the LFS and RTI + SE results without the distorting effects of COVID-19.

Figure 3: OPW calculated using LFS vs RTI + SE QoQ Growth (%) for Q1 2015 – Q1 2019 and Q3 2021 – Q3 2025. Data Source: Office for National Statistics, Own elaboration by TPI Productivity Lab

Figure 4: OPH calculated using LFS vs RTI + SE QoQ growth (%) for Q1 2015 – Q1 2019 and Q3 2021 – Q3 2025. Data Source: Office of National Statistics, Own elaboration by TPI Productivity Lab

Divergence in trend

The effect of the coronavirus pandemic on productivity was relatively short term, with output per hour rebounding quickly and returning to its long-term trend by late 2021. This recovery stands in contrast to the sharp and prolonged decline observed during the 2008 recession. However, while the immediate post-pandemic recovery was robust, recent quarters reveal a deceleration in productivity gains and a slight departure from the long-run trend. This suggests potential challenges to maintaining sustained productivity growth moving forward. Figure 5 illustrates the trends in output per hour, hours worked, and gross value added (GVA) from Q1 2007.

Figure 5: Output per hour worked vs Hours worked vs Gross Value Added for Q3 2025 Flash Estimate data (Q1 2007 =100). Data Source: Office of National Statistics, Own elaboration by TPI Productivity Lab

Discussion

The latest figures indicate that the UK economy expanded by just 0.1% in the third quarter of 2025, marking the slowest growth rate since 2023. This follows growth increases of 0.7% in the first quarter and 0.3% in the second, indicating a steady decline in GDP growth. The Financial Times reflects that this was driven by output unexpectedly shrinking in September, highlighting the fragile state of the economy.

The ONS has listed production as a major contributor to the slowing of output for the UK economy, reporting that production output fell by 2% in September. This decline was largely due to a 28.6% drop in the manufacture of motor vehicles, trailers, and semi-trailers, which is being linked to the recent major cyber-attack on Jaguar Landrover.

Regarding the labour market, unemployment has reached its highest level since the Covid-19 pandemic. This rise has been partly attributed to increases in employer national insurance contributions. According to OECD data, the overall unemployment rate is 5%, and the youth unemployment rate (ages 15–24) is 15.3%.

Figure 6 shows quarterly growth across the UK economy between Q1 2023 and Q3 2025, reinforcing the pattern of slowing growth and increasing economic fragility.

Figure 6: Gross domestic product at market prices, chained volume measure, Q1 2023 to Q3 2025. Data Source: Office of National Statistics, Own elaboration by TPI Productivity Lab

According to a research briefing from the UK Parliament, the UK ranked fifth among the G7 nations in terms of real GDP change from Q4 2019 (pre-Covid) to Q3 2025. OECD data indicates that Britain ranked joint second with Canada amongst G7 nations in the second quarter in terms of GDP growth, as shown in Figure 7. France recorded the highest growth among the G7 nations, while Japan’s economy contracted. Germany and Italy both recorded zero growth in Q3. US data is not yet available for Q3 at time of publication so cannot be compared.

* indicates that data is provisional at the time of publication

Figure 7: Q3 2025 GDP Growth by Country. Data Source: OECD, Own elaboration by TPI Productivity Lab