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Official figures on Friday showed Britain’s economy grew by almost 2%, in a surprise move that shows the country has recovered from the pandemic much faster than previously reported.
The Office for National Statistics changes mean the UK is no longer the worst performing economy in the G7, a relief for a government struggling with inflationary pressures and a cost-of-living crisis.
The change reveals that the country’s economy expanded by 0.6% by the end of 2021 compared to pre-pandemic levels, instead of shrinking by 1.2% as previously estimated.
Prime Minister Jeremy Hunt said: “The fact that the UK has recovered from the pandemic much faster than expected shows that those determined to undermine the British economy have once again been proven wrong.” he said, adding that the fight against inflation still needs to be won.
In a preview of new national economy data to be included in official statistics from October, the ONS said it had discovered significant sources of growth it had not previously considered, particularly as the economy recovers from the pandemic in 2021. .
Simon French, chief economist at British investment bank Panmure Gordon, described the changes as “unusual”, adding: “The overall story of the UK economy post-pandemic has just been revised.”
As recently as mid-August, it was officially announced that data It reflects ONS estimates that the economy was still not at pre-pandemic levels in the second quarter of this year.
However, after the revisions are incorporated into October’s official statistics, it will show that the UK economy will recover from the pandemic in the second half of 2021, and that it will be as resilient as France and more resilient than Germany.
This would add the equivalent of two years of current UK growth to gross domestic product.
Some analysts argued that the changes would not change the overall picture of Britain’s economy, which has been in a slump since the 2016 Brexit referendum.
John Springford, deputy director of the Center for European Reform think tank, said it was “worth remembering” that the ONS had previously revised down 2020 GDP by 1.7 percentage points on last year’s changes.
The reforms also do not change official tax revenue or public spending data, so they may not have a major fiscal impact. However, the Office for Budget Responsibility will need to take new data into account when developing its forecasts to accompany the Government’s Autumn Statement.
The ONS now says the economic contraction at the height of the coronavirus crisis in 2020 was not as severe as previously thought.
It turns out that instead of getting rid of unsold inventory, as previously thought, companies were building up more of it.
This stock buildup has resulted in the level of real gross domestic product for 2022 being revised upwards by £14bn. As a result, GDP in 2020 is estimated to have declined by 10.4% instead of 11%. That fall still ranks as the worst annual contraction since the Great Frost of 1709.
The ONS also found that wholesale companies and the healthcare sector produced far more in 2021 than previously thought.
This correction was primarily due to higher margins as COVID-19 restrictions eased, boosting revenues, profits and ultimately GDP.
The ONS update corrects a previous anomaly in which measured output did not increase commensurately, despite significant additional funding being spent on healthcare during the pandemic. This also meant that GDP was significantly higher than previously thought.