{"text":[[{"start":8.96,"text":"Early signs of tech-driven improvements in productivity growth could herald a sustained strengthening in the UK’s economic outlook, analysts have said, in a turnaround after years of underperformance."}],[{"start":20.86,"text":"Private sector productivity grew by 1.8 per cent in the second quarter compared with a year earlier, up from 1.2 per cent previously, according to analysis of official data by investment bank Morgan Stanley. The rise extended gains since 2024 and reduced the growth gap with the US."}],[{"start":38.52,"text":"The reasons behind the upsurge are heavily contested, but some analysts point to increasing AI adoption in sectors including information technology and business services. If the recent productivity acceleration can be sustained over years, it could bolster incomes and help alleviate some of the strains on Britain’s public finances."}],[{"start":57.36,"text":"“The more time passes with the UK’s private sector recording these levels of productivity growth, the more likely it is that the cyclical upswing does have a longer-lasting, structural component,” said Bruna Skarica, an economist at Morgan Stanley."}],[{"start":71.36,"text":"“It is fair to ask whether the persistent improvement in productivity growth we have seen in the US post-Covid will, with a delay, translate to a similar pick-up in the UK, as AI adoption plays an increasing role.”"}],[{"start":null,"text":"
"}],[{"start":83.56,"text":"The figures are a fillip to John Healey ahead of his October Budget, after the new chancellor received a boost from strong second-quarter GDP figures."}],[{"start":92.18,"text":"The acceleration comes after a lengthy period of lacklustre productivity growth following the 2008 global financial crisis, which has caused living standards to stagnate and added to strains on the public finances."}],[{"start":104.82,"text":"Last year the Office for Budget Responsibility downgraded its medium-term estimate of underlying productivity growth by 0.3 percentage points to 1 per cent."}],[{"start":114.34,"text":"The move by the independent fiscal watchdog was a blow to then chancellor Rachel Reeves, who repeatedly said growth was the number one mission of the government."}],[{"start":122.72,"text":"The productivity picture has been muddied by problems with data from the Office for National Statistics. Its customary measure, which shows more sluggish productivity growth, relies on the Labour Force Survey, which has been hit by low survey responses and is in the process of being replaced."}],[{"start":138.24,"text":"Instead, economists are now increasingly focused on alternative ONS measures of the workforce using taxpayer data collected via the government’s Pay As You Earn system."}],[{"start":148.9,"text":"These measures show a sharp pick-up in output per worker since 2024, with new ONS data confirming the trend this week. Morgan Stanley’s measure of productivity, which is based on fresh figures, excludes public sector-dominated parts of the economy such as education and health."}],[{"start":167.12,"text":"Andrew Wishart, UK economist at Berenberg bank, said widening adoption of AI in some sectors might be a driver, pointing to strong output growth in IT as well as scientific and technical services since 2024. These gains have come without rising employment, signalling increases in output per worker."}],[{"start":186.88,"text":"The Bank of England’s regional agents reported last month that AI adoption had been increasing productivity in a range of sectors, including software, finance, customer service, professional services and creative industries."}],[{"start":200.72,"text":"“Firms that deploy AI effectively and at scale can increase output without a corresponding increase in employment, and in some cases reduce staffing requirements,” the agents said."}],[{"start":211.08,"text":"John Van Reenen, a London School of Economics professor and former chair of Reeves’ council of economic advisers, estimates that annualised productivity growth is running at 1.6 per cent from the third quarter of 2024 onwards, compared with just 0.3 per cent over the previous decade."}],[{"start":228.4,"text":"He also sees hints that some of the improvement comes from AI, drawing a parallel with the second half of the 1990s and early 2000s, when the information and communications technology productivity surge in America began showing up in UK data only with a lag."}],[{"start":244,"text":"However, economists differ sharply over the relevance of the AI narrative at this stage given the patchy nature of the evidence to date."}],[{"start":252.12,"text":"Michael Saunders, adviser at consultancy Oxford Economics and a former BoE rate-setter, said the UK sectors that had registered the biggest pick-up in productivity in the past couple of years compared with the preceding 10 included accommodation, wholesale and retail — which are not leading adopters of AI."}],[{"start":null,"text":""}],[{"start":270.1,"text":"Many of these businesses have slowed hiring or cut headcount because policies such as Reeves’ increase to employers’ national insurance and rises in the minimum wage have made it more expensive to employ lower-earning workers."}],[{"start":282.44,"text":"This has hit job opportunities for lower-skilled jobseekers as well as young people seeking to enter the jobs market, with youth unemployment close to an 11-year high."}],[{"start":291.28,"text":"If the higher productivity comes as people are priced out of jobs without being able to find alternative opportunities, it represents a less benign picture of the economy’s performance."}],[{"start":300.96,"text":"Saunders said this did not mean AI would not boost wider productivity sometime in the future, “but the industry data so far does not suggest it is a big factor”."}],[{"start":310.32,"text":"Analysts said it was in any case far too soon to expect the productivity growth to change the thinking inside the OBR on trend productivity growth — a critical input into its forecasts for tax revenue and the budget deficit."}],[{"start":322.88,"text":"Wishart said it was “striking” how solid UK growth had been recently without any contribution from rising employment, but that what mattered was the longer-term productivity story. “There will be no bonanza in this Budget from it.”"}],[{"start":339.11,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1787212284_5320.mp3"}