UK productivity growth has accelerated and may be increasing faster than the official statistics suggest, according to a Bank of England policymaker.

Silvana Tenreyro, an external member of the BoE’s monetary policy committee, said in a speech in Glasgow that fluctuations in output per hour had masked an uptick in productivity since 2014, leaving the UK economy with excess capacity and mitigating the need for further interest rate rises.

“Smoothing through some of the volatility, there is some evidence of a mildly improving trend emerging,” Ms Tenreyo said, adding that according to BoE calculations, annual productivity growth had picked up from 0.4 per cent between 2010 and 2014 to 0.6 per cent in the next four years to 2018.

“Moreover, early estimates of [output] (and therefore productivity) are typically revised up over time,” she said, pointing out that Bank of England economists believed revised statistics would show that the trend in productivity growth increased to 0.8 per cent per year between 2014 and 2018.

Productivity growth has been the missing piece of the UK’s economic recovery since the 2008 financial crisis: it has been blamed for low wage growth and, until recently, slow growth in tax receipts.

But economists have begun to question why Britain’s labour market and public finances have pointed to a relatively strong economy even as the headline rate of economic growth has weakened.

Last year the Bank of England based moves to raise interest rates on a belief that weak productivity growth meant the UK was growing faster than its underlying capacity to produce goods and services.

Policymakers were concerned that any acceleration in wage growth would be passed on in consumer prices unless they slowed the pace of growth through higher interests rates.

But this February the central bank retreated from its plans for multiple rate rises and cut its outlook for growth, blaming Brexit uncertainty and a slowing global economy.

Ms Tenreyro, an Argentina-born academic who joined the Monetary Policy Committee in 2017, is considered to be one of the more dovish members of the nine-strong committee, which has responsibility for setting interest rates in order to hit the central bank’s 2 per cent inflation target.

She said that faster productivity growth might be one reason why recent inflation data had consistently come in below the central bank’s forecast. In January inflation fell to 1.8 per cent, its lowest rate for two years. Ms Tenreyro said that before voting for higher interest rates, she would wait to “see an increase in domestic inflationary pressures”.

Ms Tenreyro said other possible explanations for unexpectedly weak inflation included companies cutting their profit margins in the face of competition from retail behemoth Amazon, or a weak housing market and falling rental costs in the wake of the Brexit vote.

“Irrespective of the mechanism, the evidence from the inflation data suggests to me that supply has been growing in line with demand over the past couple of years, if not slightly faster,” she said.

Recommended The UK economy at a glance

She acknowledged that falls in business investment through 2018 meant the UK’s productivity recovery could weaken in the short term, however a “smooth transition to a new trading arrangement with the EU” would allow it to continue.

Her speech came ahead of the chancellor’s Spring Statement on Wednesday. Philip Hammond is expected to announce a multibillion-pound windfall for the government from higher-than-forecast tax receipts.

However, if the government’s withdrawal agreement with the EU is voted down on Tuesday, Mr Hammond is likely to use his speech to warn parliament that a “no deal” exit from the EU would put billions of pounds of spending on public services, funded by that windfall, into question.

Copyright The Financial Times Limited . All rights reserved. Please don't copy articles from FT.com and redistribute by email or post to the web.