Nearly one million workers in Britain’s jobs market have been “lost” because of poor and unreliable official data and the rate of UK unemployment and inactivity may have been overstated, a think tank has claimed.

Economists at the Resolution Foundation have accused the Office for National Statistics (ONS) of misrepresenting trends in the jobs sector through inaccurate figures from its Labour Force Survey (LFS), which they say has underestimated growth in employment by 930,000 workers since 2019.

The ONS has been warning over the accuracy of its main LFS data for some time, because of poor response rates to the survey since the start of the pandemic, with economists increasingly becoming reluctant to place any weight on the statistics.

The Resolution Foundation said it had created its own alternative estimate of employment across the UK, using data from HM Revenue and Customs payroll and self-employment data as well as the latest ONS population data.

It believes its new employment index suggests the employment rate could be around 76%, rather than the official rate of about 75%, as reported by the ONS.

This could also have implications for the unemployment rate, currently estimated at 4.3% in the third quarter, as well as the level of inactivity in the workforce, which has been surging in recent years, according to ONS data.

Adam Corlett, principal economist at the Resolution Foundation, said: “Official statistics have misrepresented what has happened in the UK labour market since the pandemic, and left policymakers in the dark by painting an overly pessimistic picture of our labour market.

“The ONS Labour Force Survey appears to have ‘lost’ almost a million workers over the past few years compared to better sources.

“This has led to official data underestimating people’s chances of having a job, overstating the scale of Britain’s economic inactivity challenge, and likely overestimating productivity growth.”

The Foundation added that the Government’s target to reach an 80% employment rate will be “marred by poor quality data”, making it harder to draw up policies.

It claims that the response rate to the ONS’s jobs survey has slumped to just 13% from 39% between 2019 and 2023, which has seen workers less disproportionately likely to respond, while it has also struggled to reflect the growing importance of workers from outside the European Union.

The ONS said it was aware of issues with the LFS data and has been placing more weight on other statistics, such as the more timely payroll data from HMRC.

It also stressed that recent improvements to increase response rates have seen the number of interviews carried out rise from 44,238 to 59,139.

An ONS spokesperson said: “We have been clear for some time that we believe the trends in employees produced from the HMRC tax information and our own separate survey of employers are likely to be painting a more accurate picture than that currently presented by the LFS.

“Our ongoing work to improve the LFS estimates by increasing the sample, reintroducing face-to-face interviews, increasing incentives for those taking part and reweighting the data using the latest population information will all help to improve the quality of the survey.”

It said it was “working with outside experts to assess if any further action may need to be taken”.

It comes after the Resolution Foundation also announced on Tuesday that former Treasury director of policy, Ruth Curtice, has been appointed as its new chief executive and will start on January 20.