The UK economy has received a significant boost as new figures from the Office for National Statistics (ONS) reveal that it is larger than previously thought. The upward revision comes just days before the Conservative Party’s annual conference, providing Prime Minister Rishi Sunak with positive news to share with attendees. The ONS data shows that the UK is no longer lagging behind every major industrial nation in its recovery from the pandemic, with Germany and France now at the bottom and the UK ranking third to last.
According to the revised figures, the UK economy was 2 percent larger in the second quarter than initially estimated, successfully recovering all the output lost during the pandemic by the end of 2021. This puts the UK’s GDP 1.8 percent above pre-Covid levels, instead of the previously thought 0.2 percent below. In comparison, Germany’s economy is just 0.2 percent bigger than pre-pandemic levels, while France’s is 1.7 percent larger.
The government is likely to seize on these figures as evidence of resilience in the face of the current cost-of-living crisis, which is considered the most severe in decades. The timing of this news is particularly favorable for Prime Minister Sunak, as the Conservatives are heading into their annual conference amid poor opinion poll ratings and disagreements over a major rail project’s future, just one year before an anticipated general election. Sunak has made reducing inflation and growing the economy his key election pledges.
In the second quarter alone, the UK economy grew by 0.2 percent, in line with previous estimates. However, the growth rate was somewhat hindered by widespread public-sector strikes over pay and the ongoing cost-of-living squeeze. On a positive note, real disposable incomes per head increased by 1.2 percent, and the saving ratio, which represents the proportion of income left after spending on goods and services, rose from 7.9 percent to 9.1 percent.
The revised GDP figures for the second quarter provide an up-to-date assessment of how the UK economy fared during a period characterized by rising inflation and interest rates. The ONS had previously announced revisions to the end of 2021, which offered a new narrative of the pandemic’s impact. The use of new methodologies allowed statisticians to identify that the healthcare sector, in particular, had contributed more to the economy than initially estimated.
These revisions since 2021 shed light on the challenges faced by the Bank of England in managing inflation, as the economy has been running at a higher level than expected. Additionally, they suggest that British workers have been more productive than initially calculated. However, it is important to note that these figures have limited implications for the country’s public finances and fiscal policy, as they do not provide insights into future economic performance and tax revenue generation.
Overall, the revised figures showcasing the UK economy’s larger-than-expected size will undoubtedly be received positively by ministers, who will highlight them as a sign of resilience and strength in the face of economic challenges. Prime Minister Sunak, in particular, will likely leverage these figures to support his promises of cutting inflation and fostering economic growth. However, it remains to be seen how these developments will impact the future trajectory of the UK economy and its ability to address ongoing economic concerns.
More detail via The Straits Times here… ( Image via The Straits Times )