According to updated data, which gives more weight to healthcare and energy industries, the UK economy has recovered from the Covid-19 epidemic in a better state than was previously believed.
Office for National Statistics has now revised its estimate for the annual volume GDP growth for 2020 to 4.8 percent — a 0.5-point increase from its previous estimate.
In a Wednesday update, the agency made small revisions to its estimates for 2020 and 2021, while leaving those for previous years unchanged.
The ONS upgraded its forecast for 2022, a year in which the UK faced soaring inflation and market turmoil following Liz Truss’s “mini” Budget, partly because of the stronger growth seen in the professional, business support, and transport industries.
The agency reworked their numbers for the first to reflect the new structure of the economy after the pandemic.
The re-based figures indicate that the NHS is still trying to catch up on backlogs in care, and the share of health spending has remained the same.
Energy sector contributed a larger share to activity due to the increase in oil and gas prices worldwide that followed Russia’s invasion of Ukraine.
The hospitality sector, which had been hard-hit by Covid-19, has remained smaller compared to its prepandemic size, and the manufacturing share of output has fallen as high energy costs took their toll.
ONS has also called for a reassessment on rail and air transportation in light of the pandemic. The ONS said that the rail industry received subsidies from the government to continue operating while airlines stopped operations in large numbers. This had a greater impact on growth in 2020 and 2021 than previously thought.
The ONS’s annual revisions are not as dramatic as those announced in the last two years.
The revisions made last year led to a radical new assessment of the UK’s performance during the pandemic. It showed that the UK economy was much more resilient than originally thought and not as outlier on the international stage.
The latest figures, which are still larger than usual revisions, confirm this picture. They show that the cumulative GDP growth between 2020 and 2022 is higher than the prior estimate of 1.9 percent.
Simon French, Chief Economist at Panmure Liberum Investment Bank, stated that the UK’s recovery after the Covid Crisis was “increasingly appearing middle of the pack” amongst its G7 counterparts.
The upgrade will not affect the UK fiscal outlook which is based upon more recent borrowing data, nor the interest rate decisions of the Bank of England which pay more attention to changes in growth trajectory.
ONS, who drew harsh criticism last year over the size of its reassessment of the situation, stated that recent revisions “reflected the widespread challenges in estimation during the pandemic and recovery period”.
Craig McLaren is the head of national accounting at the ONS. He said that the agency normally updates the “weight” they give each industry in GDP every year, but was forced to stop this when many parts of the economy were closed or operated very differently than usual.
The first weight update since 2019 has had “a notable impact”. . . “Given the significant changes in how our economy operates due to both pandemics and the impact of Russia’s invasion into Ukraine”, he stated.
The agency will release figures in September that bring its GDP estimates for 2023 and 2024 into line with updated and reweighted information.
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