The latest official figures indicate a more robust recovery for the UK economy at the end of 2021 amid the ongoing COVID-19 pandemic than previously believed. New data reveals that, in the final quarter of 2021, the economy exceeded pre-pandemic levels by 0.6%, in stark contrast to earlier estimates suggesting a 1.2% contraction. This upward revision has been hailed by the government as evidence that naysayers who underestimated the British economy have been proven wrong.
The Office for National Statistics attributes these changes primarily to improved data quality from its annual survey. Additionally, the revised figures reveal that the economic downturn during the 2020 lockdown was milder than initially thought, with a 10.4% decline rather than 11%. Furthermore, the recovery in 2021 exhibited greater momentum, with a growth rate of 8.7% rather than the previously reported 7.6%.
However, it’s worth noting that, despite the significant discrepancy in economic performance between the end of 2021 and the preceding period, these fluctuations must be contextualized within the volatile environment created by the pandemic. The ONS points to several reasons for the revision, including companies holding unsold inventory during the pandemic and an adjusted calculation for health service output, particularly within the NHS.
When viewed in the context of the larger G7 economies, this revision could position the UK’s economic performance closer to that of France and Italy, with the potential to surpass Germany. Chancellor Jeremy Hunt sees this as validation that those who criticise the British economy have been proven wrong, though he acknowledges that challenges, such as inflation, remain to be addressed.
While this revision provides valuable insights into the pandemic’s lasting impact on the UK economy, it doesn’t provide a comprehensive picture of the current economic landscape, which is grappling with energy price shocks and rising interest rates—developments that occurred after these revisions. Importantly, the UK and the US are among the few countries to revise their 2021 economic data, raising the possibility that other major European nations like Germany, France, and Italy may follow suit, potentially revealing previously unseen nuances in their economic performance during the pandemic.
