Productivity data reaction: Resist calls to downgrade productivity growth forecast, IPPR warns OBR
14 Aug 2025 01:03 PM
Carsten Jung, associate director for economic policy at IPPR, reacted to yesterday’s quarterly productivity statistics from the ONS
- The data from the ONS shows productivity in Q2 is down by 0.8 per cent compared to a year earlier
- The decline in productivity is largely driven by higher than expected increase in working hours, however these numbers will likely be revised in the future
- The OBR is under pressure to downgrade its productivity forecast, costing the Exchequer billions, but this is premature says IPPR
“The productivity data shows that the UK economy still faces challenges. But, all forecasters agree that productivity will rebound — the real question is by how much.”
“There is growing pressure on the OBR to downgrade its productivity growth forecast. Some of the larger numbers floated would have close to austerity-level implications for the UK.
“The OBR should resist making such a change now. Interpreting the UK’s productivity statistics at the moment is like navigating through fog — the uncertainties are vast. There are, in fact, some grounds for optimism about a recovery.
“By holding the line this autumn, the OBR can avoid triggering damaging fiscal tightening and give itself time to act when the outlook becomes clearer.”
New analysis from IPPR, will say in further detail:
- Economists are pressuring the OBR to cut its productivity forecast in this autumn’s outlook, citing years of weak performance. The fiscal impact could range from negligible to a £44 billion hit to the public finances — all from changing a highly uncertain forecast. Given such high stakes, the evidence for a downgrade must be robust.
- There are three reasons why the case is not strong enough:
- The latest ONS data is broadly in line with the OBR’s expectations, not contradicting them.
- The Bank of England — previously more pessimistic than the OBR and a driver of calls for alignment — has upgraded its forecast, bringing it close to the OBR’s.
- There remains exceptional uncertainty about recent productivity figures and the economy’s recovery path.
- As such, the OBR should hold off on any downgrade until the data offers a clearer view.
Carsten Jung is available for interview. Carsten is an associate director at IPPR and a former economist at the Bank of England.
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NOTES TO EDITORS
IPPR’s new analysis on the OBR productivity forecast will be available online here: https://www.ippr.org/articles/navigating-in-the-fog-why-the-obr-should-hold-its-nerve-on-the-productivity-forecast
IPPR is the UK’s most influential think tank, with dozens of alumni in Downing Street, the cabinet and parliament. We are the ideas factory behind many of the current government’s flagship policies, including changes to fiscal rules, the creation of a National Wealth Fund, GB Energy, devolution, and reforms to the NHS. IPPR is an independent charity which has seconded staff to government departments including DHSC and DESNZ to support ministers on crucial policies such as the 10-year health plan and the industrial strategy: www.ippr.org