Jump to
Share this resource

Share this resource

Copy link
Copy Link

Theme 1

Structure and performance of the UK economy

Policy questions and key messages

  1. What are the top-performing UK industries by labour productivity?
  2. What are the top-performing UK industries by earnings?
  3. How has their performance evolved in recent decades?

Knowledge-intensive services and manufacturing industries are key drivers of UK innovation, exports, and productivity growth:

  • Economic activities contribute to the UK economy in different ways: while labour-intensive services account for more than half of the UK value added and employment, knowledge-intensive services and manufacturing together account for 90% of business investment in research and development; manufacturing also accounts for 90% of goods exports, and knowledge-intensive services account for almost 70% of service exports.
  • Knowledge-intensive services and manufacturing include 12 of the 20 most productive sectors (identified from granular analysis of 65 UK SIC 2-digit industries), including pharmaceutical manufacturing, finance and insurance, manufacturing of refined petroleum products, information and communication, and scientific research and development.

Over the last 3 decades, the UK has experienced stagnant productivity growth and a shift in employment towards services, while telecommunications and selected manufacturing industries have driven productivity gains:

  • Between 1997 and 2024, manufacturing industries recorded strong productivity growth (2.8%–11.0% annually), and telecommunications was the fastest- growing productivity sector (23.3%); telecommunications, electronics manufacturing, insurance, computer programming, wholesale trade, and pharmaceuticals were among the industries that made the largest aggregate contributions to productivity growth.
  • Over the same period, employment growth was concentrated in knowledge- and labour-intensive services, while manufacturing employment declined overall, despite a post-COVID-19 rebound in sectors such as the manufacture of electrical equipment and the manufacture of computer, electronic, and optical products.

Despite its historic earnings premium, manufacturing now records median earnings below the national level:

  • In 2025 the highest median gross annual earnings were seen in financial and insurance activities (£58,488), energy supply (£55,469), information and communication (£52,264), mining and quarrying (£50,943), and professional, scientific, and technical activities (£46,208), sectors that were also among the most productive in the economy and which accounted for 17% of the workforce.
  • The lowest-paid industries experienced the fastest earnings growth over the past decade. In contrast, manufacturing, which has traditionally offered earnings above the economy-wide level, saw weaker earnings growth from 2022 relative to the all-industry median, placing the sector (£38,956) slightly below the national level in 2025 (£39,040).

Structure of the UK economy, 2024

  • In 2024 knowledge-intensive[3] and labour-intensive services[3] contributed to approximately 80% of the UK economy’s gross value added and employment.
  • Manufacturing (both low/medium-tech and medium/high-tech[3]) accounted for nearly half of the R&D performed in UK businesses (BERD) and 90% of goods exports. Top goods-exporting industries included automotive, other transport equipment, pharmaceutical products, machinery and equipment, and computer, electronic, and optical products.
  • Knowledge-intensive services accounted for the largest shares of services exports (67.8%) and 43.6% of BERD. Top service-exporting industries included financial activities, computer programming, management consultancy, education, and legal and accounting activities.

[3] Note: Appendix 1.1 defines these sectoral group classifications.

Top 20 industries by labour productivity, 2007 and 2024

  • Sector performance was assessed at a granular level using data for 65 industries defined at the 2-digit UK SIC level. We then identified the 20 industries with the highest productivity levels, which together account for over one third of total economy value added. Of these, 12 were in the knowledge-intensive services and manufacturing sectoral groups, including pharmaceutical manufacturing, financial and insurance, the manufacture of coke and refined petroleum products, information and communication industries, and scientific research and development.
  • Industries with the highest productivity levels also saw some of the largest gains in labour productivity between the pre-financial-crisis period (2007) and the post-pandemic period (2024), especially telecommunications, computer and electronics manufacturing, insurance and pension funding, coke and refined petroleum, chemicals, and pharmaceutical manufacturing.
  • By contrast, labour productivity (in real terms) declined in mining and quarrying and in real-estate activities over the same period, although these industries continued to exhibit some of the highest absolute productivity levels.

Note: Productivity measures for real-estate activities should be interpreted with caution. Value added in this sector includes imputed rents for owner-occupied housing, which are not directly linked to market production or labour input. As a result, measured labour productivity in real estate can seem artificially high.

Top 20 industries by productivity growth, 1997-2024

  • Between 1997 and 2024, UK productivity remained broadly stagnant, although performance varied substantially across sectors. Manufacturing industries recorded relatively strong productivity growth both before and after the financial crisis and during the COVID-19 pandemic, with average annual growth rates between 1997 and 2024 ranging from 2.8% to 11.0%.
  • Telecommunications consistently recorded the highest productivity growth, with an average annual growth rate of 23.3% from 1997 to 2024. But these results should be read with caution, as they may reflect changes in the methodology used by the ONS to compute the deflator for this industry.[1] Using productivity measured at current prices, the implied growth from 1997 to 2024 was much lower, at 3.1%.
  • The pandemic shock generated sharp short-term volatility. But several industries recorded positive productivity growth during 2020–21, particularly the manufacture of electrical equipment (21.6%), telecommunications (19.3%), basic pharmaceutical manufacturing (16.6%), insurance and pension funding (14.8%), the manufacture of machinery and equipment (11.5%), and scientific research and development (11.0%).
  • This period of disruption was followed by an uneven rebound in 2022–24, with several sectors that had seen productivity gains during the pandemic subsequently experiencing negative growth rates, particularly the manufacture of electrical equipment (-13.7%), chemicals manufacturing (-10.6%), and the manufacture of machinery and equipment (-5.0%).

[1] Note: See ONS (2021). Double deflation methods and deflator improvements to UK National Accounts: Blue Book 2021.

Top 20 industries by contribution to productivity growth, 1997-2024

  • How an industry contributes to aggregate productivity growth depends on its productivity level, its rate of productivity growth, and its relative size in the economy. To capture these dimensions, we computed the sectoral within effect for each of the 65 industries examined, which weights industry-level productivity growth by each sector’s share of value added in the economy (See Appendix 1.2).
  • Telecommunications made the largest contribution to aggregate productivity growth. Its within-industry effect was around four times larger than the manufacture of computer, electronic, and optical products, which ranked second on this measure. But these results should be read with caution, as they reflect changes in the ONS deflator methodology.[1]
  • A sharp weakening in within effects followed the financial crisis of 2008/9, particularly in financial services. Although several manufacturing industries continued to make positive within contributions, these were generally smaller than in the pre-crisis period.
  • In the post-pandemic period, the largest contributions were seen in air transport, telecommunications, public administration and defence, and the manufacture of motor vehicles and other transport equipment.

[1] Note: See ONS (2021). Double deflation methods and deflator improvements to UK National Accounts: Blue Book 2021.

Top and bottom 10 industries by employment growth, 1997-2024

  • From 1997 to 2024, service activities recorded the largest increases in employment, whereas manufacturing industries and insurance saw the most pronounced declines. But some manufacturing industries saw renewed employment growth in the period following the COVID-19 pandemic.
  • During the pre-financial-crisis period (1997–2007), the strongest employment gains were seen in management consultancy activities (6.9%), computer programming (6.6%), and employment activities (6.5%). In contrast, the largest declines occurred in the manufacture of textiles, wearing apparel, and leather products (-9.9%), the manufacture of electrical equipment (-4.2%), and computer, electronic, and optical products (-4.0%).
  • In the post-financial crisis period (2012–2019), employment growth was strongest in professional services (4.7–7.2%) and information and communication services (4.0–4.8%).
  • During the COVID-19 pandemic, employment declined in most industries, with exceptions including information services (9.8%), warehousing (7.8%), and activities auxiliary to financial and insurance services (5.5%).
  • In the subsequent period, manufacturing industries experienced employment growth, particularly in the manufacture of electrical equipment (5.7%) and computer, electronic, and optical products (2.9%).

Annual earnings and employment shares by industry, 2015-2025

  • Between 2015 and 2025, employment growth was concentrated primarily in knowledge-intensive services, some of which offer among the highest earnings and in certain labour-intensive service industries, which tend to provide earnings below the national median.
  • In 2025 the industries reporting the highest median gross annual earnings included financial and insurance activities (£58,488), electricity, gas, steam, and air conditioning supply (£55,469), information and communication (£52,264), mining and quarrying (£50,943), and professional, scientific, and technical activities (£46,208). These industries accounted for 17% of the UK workforce.
  • As shown in Chart 1.2, these industries were also among those with higher productivity levels. In addition, information and communication and professional, scientific, and technical activities were among the sectors that saw the largest expansions in employment during this period.
  • By contrast, the industries reporting the lowest median gross annual earnings included accommodation and food service activities (£28,687), agriculture, forestry, and fishing (£32,784), arts, entertainment, and recreation (£32,871), wholesale and retail trade repair of motor vehicles and motorcycles (£33,158), other service activities (£33,537), and human health and social work activities (£35,744). Several of these industries also accounted for large employment shares. Taken together, these six industries employed 40% of the workforce.

Earnings dynamics, 2015-2025

  • The lowest-paid industries experienced the fastest growth in earnings over the past decade.
  • Between 2015 and 2025, agriculture, forestry, and fishing (4.3%) and labour-intensive service industries – particularly accommodation and food service activities (5.1%) and administrative and support service activities (4.5%) – recorded earnings growth above the national average.
  • Vacancy rates remained comparatively high in labour-intensive sectors, especially accommodation and food service activities. In contrast, higher-paid industries tended to exhibit lower vacancy rates and more moderate earnings growth, except for financial and insurance activities.
  • Manufacturing has traditionally recorded earnings above the economy-wide level. But from 2022, its earnings fell behind the all-industry median, placing the sector (£38,956) slightly below the national level in 2025 (£39,040).

Appendix 1.1: Sectoral group classification and statistical codes

Appendix 1.2. Decomposition of productivity growth