EconToMarks Deep Dive · 13 August 2026
UK output per hour rose 0.7% year on year in Q2 2026
ONS’s preferred RTI-based estimate showed UK output per hour 0.7% higher in Q2 2026 than a year earlier and output per worker 1.4% higher. The alternative LFS-based estimate was weaker, making measurement uncertainty a ready-made evaluation point.
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What happened
Using the ONS-recommended PAYE-RTI-based approach, output per hour was 0.7% higher and output per worker 1.4% higher in Q2 2026 than a year earlier. The alternative Labour Force Survey approach showed output per hour 0.2% lower and output per worker 0.4% higher.
Why it matters
Productivity determines how much output can be produced from a given amount of labour. Sustained productivity growth can raise potential output, support real wage growth and reduce inflation pressure by lowering unit costs.
Relevant theory
Connect the event to the syllabus.
Key evidence
Preferred output-per-hour estimate
Output per hour was 0.7% higher in Q2 2026 than Q2 2025 using the preferred RTI-based measure.
Output per worker
Output per worker was 1.4% higher year on year on the preferred measure.
Alternative LFS estimate
The LFS-based estimate showed output per hour 0.2% lower, demonstrating real-time measurement uncertainty.
Best diagram
LRAS diagram showing higher productive capacity
- 1Draw an AD/AS diagram with LRAS and an initial equilibrium.
- 2Explain that sustained productivity growth increases the economy’s productive capacity.
- 3Shift LRAS to the right from LRAS1 to LRAS2.
- 4Show higher potential real output and lower inflation pressure than otherwise, while noting that one quarterly estimate is not enough to prove a permanent LRAS shift.
Chain of analysis
Step 1
Output per hour rises on the ONS preferred measure.
Step 2
Workers produce more output for each hour of labour used.
Step 3
If the improvement is sustained, unit labour costs can grow more slowly and firms can produce more at a given cost.
Step 4
The economy’s productive capacity increases.
Step 5
LRAS can shift to the right, allowing a higher level of real output.
Step 6
Higher productivity can support real wages and living standards without creating the same inflation pressure as wage growth unsupported by productivity.
Counter-case
When might the main chain weaken?
Use these conditions to challenge the initial mechanism rather than assuming the effect is automatic.
Measurement uncertainty
The preferred RTI-based and alternative LFS-based measures point in different directions for output per hour, so early productivity data should not be treated as precise.
Trend versus one quarter
A lasting LRAS effect requires sustained productivity improvement. One year-on-year reading may be revised or prove temporary.
Distribution
Higher productivity raises the economy’s capacity, but living standards rise only if productivity gains feed through to wages, profits, prices or public revenue.
Cause of productivity growth
Productivity can rise because of technology and skills, but it can also change when low-productivity jobs disappear. The underlying cause affects how durable the gain is.
Judgement
Early productivity estimates are uncertain and revised; a single quarter does not establish a lasting trend, and the ONS preferred administrative-data measure currently differs from the Labour Force Survey estimate.
Use it in a 15-marker
Use one or two pieces of the key evidence, explain the mechanism clearly, and use the diagram to anchor the causal chain. Keep evaluation focused on the condition in the judgement rather than adding unrelated points.
Use it in a 25-marker
Use the +0.7% preferred output-per-hour figure and immediately pair it with the -0.2% LFS-based estimate. That combination gives both evidence and evaluation. Analyse the long-run chain through unit costs and LRAS, then judge whether the improvement is sustained and broad enough to raise living standards.
Practice question
Evaluate the view that higher labour productivity is the most important cause of long-run economic growth.
Sources and update note
Evidence is taken from the ONS Productivity flash estimate and overview for April to June 2026. ONS currently recommends the RTI-based measure, while the differing LFS estimate makes measurement uncertainty central to evaluation.