The UK’s recovery from the pandemic was stronger than initially expected after the Office for National Statistics (ONS) upgraded its estimates for the economy’s performance.
According to the ONS, the UK economy is now thought to be 1.8 per cent larger than it was in the final quarter before the pandemic hit. Previous estimates had suggested that the UK economy had shrunk 0.2 per cent in that period.
This means the UK’s recovery has been stronger than Germany and France, although it still lags behind Italy, Canada and the US.
Chancellor of the Exchequer Jeremy Hunt said: “We know that the British economy recovered faster from the pandemic than anyone previously thought and data out today once again proves the doubters wrong.
“We were among the fastest countries in the G7 to recover from the pandemic and since 2020 we have grown faster than France and Germany,” Hunt continued.
At the beginning of the month, ONS revisions to initial estimates from the depths of the pandemic added around two per cent to the size of the UK economy.
Today’s revisions did not change estimates for growth in 2022 but showed that UK GDP grew by 0.3 per cent in the first quarter of this year rather than the 0.1 per cent it previously reported.
ONS chief economist Grant Fitzner said: “Our new estimates indicate a stronger performance for professional and scientific businesses due to improved data sources.
“Meanwhile, healthcare grew less because of new near real-time information showing the cost of delivering services.”
Looking forward Ruth Gregory, deputy chief UK economist, was less optimistic. She argued that household spending, a key driver of growth, would likely fall thanks to the impact of higher interest rates.
While business investment has been strong, Gregory said it largely reflected the impact of the super deduction, which ended earlier this year.
“We still think that higher interest rates will trigger a mild recession involving a 0.5 per cent fall in GDP in the coming quarters,” she said.
Martin Beck, chief economic advisor to the EY ITEM Club, agreed that growth would be weak for the remainder of the year.
” A rising number of households are seeing a jump in mortgage payments, still-high inflation, and frozen tax brackets mean fiscal drag is eroding spending power and the jobs market is weakening – threatening consumer confidence,” he said.