LONDON – The British economy is larger than previously thought, new figures show in a boost for Prime Minister Rishi Sunak days before his Conservative Party begins its annual conference.
The upward revision announced by the Office for National Statistics (ONS) on Friday means Britain is no longer lagging behind every other major industrial nation in its recovery from the Covid-19 pandemic. Germany and France now are at the bottom, with Britain third to last.
The British economy was 2 per cent bigger in the second quarter than previously estimated after recovering all the output lost during the pandemic by the end of 2021. It leaves gross domestic product (GDP) 1.8 per cent above pre-Covid-19 levels, instead of 0.2 per cent below as first thought.
Germany is just 0.2 per cent bigger than pre-pandemic levels and France 1.7 per cent larger.
The figures will be seized on by ministers as evidence of resilience in the face of the worst cost-of-living crisis in decades. For Mr Sunak, they are perfectly timed, with the Conservatives heading for their annual get-together against a backdrop of dire opinion poll ratings a year before an expected general election and splits over the future of a flagship rail project.
Mr Sunak has made cutting inflation in half in 2023 and growing the economy key election pledges.
In the second quarter alone, the economy grew 0.2 per cent, unrevised from the previous estimate, as activity was held back by widespread public sector strikes over pay and the cost-of-living squeeze.
Real disposable incomes per head rose 1.2 per cent. The saving ratio, the proportion of income left over after spending on goods and services, rose to 9.1 per cent from 7.9 per cent.
The GDP revisions through the second quarter bring the national accounts up to date, showing how the economy fared during a period or rising inflation and interest rates. On Sept 1, the ONS announced revisions to the end of 2021 that partially rewrote the narrative of the pandemic. Using new methodologies, statisticians found the healthcare sector, in particular, produced more than previous thought.
The changes since 2021 help to explain why the Bank of England has struggled with inflation: the economy has been running hot. They also suggest British workers were more productive than first reckoned. For the public finances and fiscal policy, there may be few implications as the figures say little about how well the economy will perform and generate tax revenue in the future. BLOOMBERG
