There was good news and bad news from today’s UK GDP figures as upward revisions to the quarter two figure were accompanied with downgrades to growth numbers for 2020, meaning the size of the UK economy is still below pre-pandemic levels..
For quarter two, the 0.1% quarter-on-quarter (q/q) contraction in GDP previously estimated was revised upwards to a 0.2% q/q rise meaning that if the UK does have a recession it will be later than many analysts thought.
But downward revisions were made to growth in 2020 meaning that rather than being 0.6% above the pre-pandemic level in Q2 2022, as previously forecast, real GDP is now thought to be 0.2% below it.
The GDP figures for 2021 were revised slightly higher to 7.5% from 7.4%.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “These revisions will compel the OBR to revise down further its estimates for future potential GDP, though as they also imply that the tax-to-GDP ratio is higher than previously estimated, the impact on the public finances should be modest.”
He said the revisions implied “that the damage inflicted to the economy’s supply side by Covid and Brexit is even larger than previously thought.“
Capital Economics suggested the news would put further pressure on the chancellor: "The good news is that the economy is not already in recession. The bad news is that contrary to previous thinking, it still hasn’t returned to pre-pandemic levels. It’s the only G7 economy in that situation and it makes the chancellor’s fiscal plans look even more untenable.”
Martin Beck, chief economic advisor to the EY ITEM Club, said much would now depend on the next fiscal moves by the UK government.
“The outlook for the economy is uncertain,” he said, adding “much will now depend on how on the successful articulation of how tax cuts will prove compatible with a sustainable fiscal position, and how the promised supply-side reforms will be delivered. On that score, a 23 November statement does seem quite far away.”