Q4 2025: UK Productivity Loses Ground in Latest Estimates

Productivity Measurement Analysis series – UK Q4 2025

by Nathan McKeogh

General summary and main figures

On the 17th of February 2026, the Office for National Statistics (ONS) released its flash estimate of UK productivity for the fourth quarter of 2025 (October to December). These figures are based on quarterly estimates of gross domestic product (GDP) figures and labour market statistics. Additionally, the release includes data for Q3 2025 regarding sectoral labour productivity.

According to the Labour Force Survey (LFS) estimates, UK productivity (output per hour) is 0.5% lower than in Q4 2024. Output per worker for the same period decreased by 0.4%. The 1.5% increase in hours worked outpaced the 1% growth in gross value added (GVA), causing this decrease in recorded productivity.

The estimates reveal that output per hour worked increased by 2.4% and output per worker rose by 2.1% when compared with pre-pandemic levels. This productivity growth resulted from GVA increasing by 6% and a 3.5% rise in hours worked.

Figure 1 shows productivity and its components from 2007 to Q4 of 2025, highlighting the stagnation of productivity in the past year.

Figure 1: Output per hour worked vs Hours worked vs Gross Value Added for Q4 2025 Flash Estimate data (Q1 2007 =100). Data Source: Office for National Statistics, Own elaboration by TPI Productivity Lab

Table 1: Flash estimates of labour productivity. UK Quarter 4 (October to December) 2024 to Q4 2025

Output per hour growth rates

Output per worker growth rates

Sectoral contributions for Q3 2025

In terms of sectoral contributions, consistent with the first and second quarters of 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 2.2%, with this increase driven by GVA rising faster than hours worked, resulting in an improvement in output per hour. This sector maintains a continuous strong upward momentum, benefiting from adoption of new technologies such as AI. and cloud computing.

On the other hand, the Financial and Insurance Activities sector made the largest negative contribution of -1.1%. This decline was driven by a fall in GVA alongside an increase in hours worked.

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 2 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 sector, 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 3 illustrates the changes in output per hour worked, GVA and hours worked for each industry in Q3 2025 compared to 2019.

Figure 2: Contribution to growth of output per hour worked by industry, percentage points, Q3 2025 compared with 2019 average, with width of the bar representing relative size of industry. Data Source: Office for 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

To better understand quarterly changes in productivity, the ONS has developed experimental methods to generate estimates of productivity using Pay As You Earn (PAYE) Real Time Information (RTI) to complement data from the Labour Force Survey (LFS). These alternative estimates produce differing assessments of recent UK productivity performance, with RTI-based measures generally indicating stronger growth than those derived from the LFS. However, these estimates should be interpreted with caution, as they are statistics in development.

RTI data does not include information on self-employment (SE). To account for this, LFS self-employment data are appended to the RTI data to produce more comparable estimates. To avoid double counting when using the LFS for self-employed workers, working proprietors are removed. Furthermore, RTI data provides an estimate of workers but does not collect hours worked. Consequently, LFS estimates of average hours worked are used in the calculation of output per hour for both the LFS- and RTI-based measures. These average hours are multiplied by each data source’s estimate of workers to calculate total hours worked. More information about the methods behind this data is available in the ONS Q1 release.

Comparing Quarter 4 2025 with the 2019 average, output per worker increased by 3.8% using RTI data, compared with 1.9% using LFS data. On a quarter-on-quarter basis, RTI indicates growth of 0.29% in Q4 of 2025, whereas the LFS suggests a decline of 0.1%.

A similar pattern is observed for output per hour. Relative to the 2019 average, RTI estimates growth of 4.3% in Q4 of 2025, compared with 2.4% using the LFS. On a quarter-on-quarter basis in Q4 2025, the LFS shows a decline of 0.6%, while RTI indicates a smaller decline of 0.2%.

Figures 4 and 5 illustrate the comparisons between the methods, showing data for the periods Q1 2015 to Q1 2019 and Q3 2021 to Q4 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 4: OPW calculated using LFS vs RTI + SE QoQ Growth (%) for Q1 2015 – Q1 2019 and Q3 2021 – Q4 2025. Data Source: Office for National Statistics, Own elaboration by TPI Productivity Lab

Figure 5: OPH calculated using LFS vs RTI + SE QoQ growth (%) for Q1 2015 – Q1 2019 and Q3 2021 – Q4 2025. Data Source: Office for National Statistics, Own elaboration by TPI Productivity Lab

Discussion

The latest figures indicate that the UK real GDP expanded by just 0.1% in the fourth quarter of 2025, matching the minimal growth of the previous quarter. This follows growth of 0.7% in the first quarter and 0.2% in the second, indicating a plateau in GDP growth.

The ONS has listed construction as a major contributor to the slowing of output for the UK economy, reporting that the construction sector fell by 2.1% in the latest quarter.

Figure 6 shows quarterly growth across the UK economy between Q1 2023 and Q4 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 Q4 2025. Data Source: Office for National Statistics, Own elaboration by TPI Productivity Lab

Regarding the labour market, unemployment has continued to rise and is approaching levels of unemployment last seen during the Covid-19 pandemic. According to OECD data, the overall unemployment rate in the fourth quarter of 2025 was 5.2%, and the youth unemployment rate (ages 15–24) was 16.1%. This represents increases of 0.2 and 0.8 percentage points respectively when compared with the previous quarter.

The FT reports that the decline in youth employment has been partly attributed to increases in employer National Insurance contributions and rises in the minimum wage, making it more expensive for companies to employ early-career staff. In addition, according to Randstad’s Workmonitor 2026 survey of over 1,200 employers, 38% reported that they plan to hire fewer graduates this year compared with last year because of AI. These findings indicate that both rising labour costs and expectations about automation may be influencing entry-level recruitment decisions. Despite a continued increase in the number of university graduates in the UK, advertised graduate vacancies have fallen to as low as 10,000, suggesting that labour demand has not kept pace with the expanding supply of graduates.

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 Q4 2025. OECD data indicates that Britain also ranked fifth in terms of quarter-on-quarter GDP growth in Q4 2025, as shown in Figure 7. The US recorded the strongest quarter-on-quarter growth at 0.4%, while Canada’s economy contracted by 0.1%.

* indicates that data is provisional at the time of publication

Figure 7: Q4 2025 GDP Growth by Country, quarter-on-quarter, chain linked volume. Data Source: OECD, Own elaboration by TPI Productivity Lab