Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
UK economic output was bigger on the eve of the last general election than was previously estimated, according to revised GDP data that points to a slightly stronger post-pandemic recovery.
Britain’s GDP at the end of 2023 was 2.2 per cent higher than its pre-pandemic peak, an improvement on the previous estimate of 1.9 per cent, the Office for National Statistics said on Tuesday. GDP per capita was also improved but still below pre-coronavirus levels.
The revisions were driven in part by improvements to ONS estimates of research and development activity, which suggested that the UK does better on such investment compared with peer countries than previously thought.
The figures from the statistics agency paint a slightly more positive picture of UK GDP after the pandemic and in the lead-up to the 2024 general election, in which the Conservatives suffered a big defeat at the hands of Labour in part because of discontent over the economy.
But Paul Dales, UK economist at research company Capital Economics, stressed that the revised data did not fundamentally change the lacklustre performance of the UK after the onset of the pandemic.
“This still leaves the recovery in the UK more muted than in the US and the Eurozone,” he said. “The small upward revision to the level of real GDP doesn’t mean the economy will be any stronger in the future.”
The revisions leave average annual growth rates little changed, remaining at 1.8 per cent between 1998 and 2003. Quarterly growth rates still averaged 0.5 per cent during the period.
“While the size of the economy now captured by GDP has increased, the long-term pattern of growth is broadly unchanged,” said Craig McLaren, ONS head of national accounts.
The figures still suggest the UK has struggled to gain momentum since the pandemic. Real GDP on a per-head basis in the fourth quarter of 2023 was estimated to be 1 per cent lower compared with the final quarter of 2019, on the eve of the pandemic. The previous estimate was 1.4 per cent lower.
Among the other drivers of the revisions are the incorporation of corporation tax returns that point to higher company profits than previously estimated, and upgraded estimates of educational activity.
Corrections to ONS data on business inflation and improvements to estimates of the overseas output of large, UK-owned manufacturers, such as pharmaceutical companies, also played a role in the revision.
But the biggest driver of the changes was an overhaul to the way the ONS measures research and development, adding 1 per cent to the level of UK GDP in 2023.
The changes mean Britain compared more favourably with other countries in terms of R&D than previously, the ONS noted.
Before changes to the way the agency surveys the activity, UK investment in R&D was just above that of Italy as a share of GDP but slightly below the Netherlands and France.
The new data indicates British R&D is higher than both these countries, but still lower than countries such as Germany, the US and Japan, according to the ONS.
McLaren said the new numbers would be incorporated into the ONS’s headline figures from September.
Once they are fully integrated, UK GDP in the second quarter of this year should be about 4.9 per cent higher than its pre-pandemic level, said Dales. But that was still below 6 per cent in the Eurozone and well under the US figure, where GDP was 12.9 per cent above its pre-pandemic level, he said.
Among G7 countries, only Japan and Germany had registered a smaller rise in GDP since the end of 2019, Dales added.
