A range of alterations in the way that the Office for National Statistics (ONS) calculates the size of the economy comes into force later this year and will mean that the downturn after the financial crisis was not quite as severe as initially believed.
The ONS believed that GDP contracted by 5.2 per cent in 2009, at the peak of the country’s recession, but new figures suggest that the drop was 1.1 percentage points shallower, at minus 4.1 per cent.
The alteration would mean that the economy had already grown back to above the record levels it reached in 2008, which was otherwise expected to happen this quarter.
Some private forecasters have also already suggested that the economy has returned to a record size. The National Institute of Economic and Social Research (Niesr) said last month that continued strong growth had probably pushed the economy to the post-crisis benchmark in May.
The current ONS alterations run only up to 2009, but revisions to growth since then could alter perceptions of the UK’s productivity challenge.
“The key impact of GDP revisions will be on the UK productivity puzzle… Upward revisions to GDP, to the extent that they represent better measured output, could lower than puzzle,” said Robert Wood of Berenberg.
“Today’s changes cut a little under one percentage point from it. In other words, they are notable but do not change the big picture. There is still a huge productivity puzzle,” he added.
Despite the fact that the total size of the economy has probably overtaken its previous peak, GDP per capita remains significantly depressed, since the country’s population has risen significantly in the six years since the crisis.