The UK actually fared much better after COVID than first thought – here’s why it matters

Published

2 years ago

September 1, 2023

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Comparing the UK economy with its pre-pandemic size has become an almost totemic way of highlighting its sluggish performance post-COVID.

It has certainly been a gift for Opposition politicians and in particular when – in September last year – the Office for National Statistics (ONS) produced evidence that the UK was the only economy in the G7 group that remained smaller than it was in February 2020.

However, today brought news that the UK economy actually fared better in the post-COVID period than previously thought.

The ONS unveiled a series of revisions for past GDP growth – affecting both 2020 and 2021.

It said that the UK economy contracted by 10.4% in the main pandemic year of 2020 – less worse than the 11% contraction previously reported.

And it said UK GDP grew by 8.7% in 2021 – considerably better than the previously reported growth of 7.6%.

Put together, it means that at the end of 2021 – rather than being 1.2% smaller than it was going into the pandemic as previously reported – the UK economy was actually 0.6% bigger.

Some will say that this is all just rear-view mirror stuff and does not really matter.

But it does.

Even in its most recent estimates for quarterly growth, the ONS was suggesting that, during the three months to the end of June, the UK economy remained 0.2% smaller than it was during the final three months of 2019, the last full quarter before the pandemic struck.

Carry these revisions across to the latest data though, and it means that, rather than being at the bottom of the G7, the UK’s economic recovery post-pandemic was well ahead of Germany and not far behind those achieved by France and Italy.

The Treasury was also quick to point out that, as of the end of 2021, the UK’s recovery trailed only those of the US and Canada in the G7.

Chancellor Jeremy Hunt said: “The fact that the UK recovered from the pandemic much faster than thought shows that once again those determined to talk down the British economy have been proved wrong.

“There are many battles still to win, most of all against inflation so we can ease cost of living pressures on families. But if we stick to the plan we can look forward to healthy growth which according to the IMF will be faster than Germany, France, and Italy in the long term.”

The ONS explained the rather dramatic upward revision thus: “These revisions are mainly because we have richer data from our annual surveys and administrative data, we are now able to measure costs incurred by businesses [intermediate consumption] directly and we can adjust for prices [deflation] at a far more detailed level.”

Part of the revision can be explained by the fact that the ONS now has a more detailed understanding of how much people were being paid in the 2021-22 financial year following the availability of more up-to-date information from HM Revenue & Customs. More up-to-date information on household spending during 2021, for example on telecoms services, has also been incorporated into the assessment of GDP.

Put together, these led to some pretty dramatic upgrades in parts of the services sector, which makes up four-fifths of UK GDP. The ONS now thinks the services sector as a whole grew by 10.9% in 2021, way ahead of the previous estimate of 7%, which is a pretty extraordinary upward revision.

The biggest contributors to that, according to the ONS, was from the wholesale and retail trade, and repairs to cars and motorcycles in particular.

Another contributor was accommodation and food services, which is now reckoned to have grown by 31.3% in 2021, up from the previous estimate of 30.9%.

Clearly the rush among Britons to eat out and stay in hotels after lockdowns ended was even bigger than previously thought.

Other sectors where activity was stronger than previously assumed were professional scientific and technical activities and healthcare services.

The commercial property sector, previously thought to have contracted during the year in question, is also now reckoned to have enjoyed growth.

These revisions are really important in terms of how we view the UK’s economic performance.

As Simon French, the chief economist and head of research at the investment bank Panmure Gordon was quick to note, the entire UK economic narrative, post-pandemic, has just been revised away. All those headlines about the UK economy not being back at pre-COVID levels, or bottom of the G7, are now obsolete.

He added: “But as a macro guy who has had to talk to international investors [about] why gilts and UK equities do or do not deserve [to trade at] a discount, this has cast huge doubt on recent investor conclusions.

“I may be biased but this deserves to lead every UK economic and business story today – to provide symmetry to the coverage that the sluggish post-pandemic recovery that has shaped investor/business/household sentiment.”

That is a key point.

There has been much hand-wringing in recent months about why international investors are shunning UK assets and why some UK companies have sought to switch their main stock market listing from London to New York.

Much of that negativity will have been informed by headlines about the UK’s lacklustre growth post-pandemic.

There is a word of caution, though. One is that the national statisticians of other countries are embarking on similar revisions to their GDP statistics using something called the “SUTS” – supply and use tables – framework. This approach is reckoned to provide a more accurate assessment of how a particular industry or sector has performed and, by extension, the economy as a whole. The statistics offices of the UK and the US are, at present, the only ones to have done this.

As the ONS pointed out today: “This means that the UK has one of the most up-to-date sets of estimates for this period of considerable economic change. Other countries follow different revision policies and practices, which can result in their estimates being revised at a later date.

“It is important this is considered when comparing the UK with other countries and our international comparison position is likely to change once other countries fully confront their datasets over time.”

And there is a broader point to make, too, which is that it is debatable whether GDP is that meaningful a measure, these days, of how the economy is doing and how all of us, as individuals, are living their lives.

As Savvas Savouri, economist at the hedge fund manager Toscafund and one of the Square Mile’s smartest economists, has told clients in the recent past: “GDP is a nonsensical measure of the modern UK economy… it fails to do justice to the ever-growing service-side of the UK economy.

“After all, measuring the production of textiles is very much easier to do than capturing the volume and value of coding for gaming, e-commerce and e-finance, architectural design, writing of legal contracts, insurance underwriting, academia to students from overseas and so forth.”

The ONS would doubtless argue, in response, that this is why it is seeking to finesse its methodology.

And, for now, it is helping paint a more encouraging picture of the UK economy.

Business

Nvidia beats expectations again in defiance of AI bubble fears

Published

11 hours ago

November 20, 2025

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Nvidia beats expectations again in defiance of AI bubble fears

The world’s most valuable company has reported another series of expectation-beating results, heading off fears of the AI bubble bursting for now.

Nvidia’s revenue reached $57bn in the three months to October, higher than Wall Street estimates and the company’s own guidance.

That’s up 62% on the same time last year, and has been described by the business as an “outstanding” quarter.

Money blog: Ryanair flights to EU banned in ‘unprecedented’ decision

A profit measure called earnings per share was also better than expected at $1.30.

It matters as Nvidia has powered the artificial intelligence (AI) boom through its computer chips, which are key parts in AI chatbots such as ChatGPT.

Nvidia has major tech companies as clients and acts as a good proxy for whether the tens of billions of dollars invested in AI is paying off.

Its chief executive, Jensen Huang, has been described as the Godfather of AI and watch parties were organised for those looking to follow the Wednesday evening announcement.

The company has been a massive beneficiary of the push to put money into AI, with its share price reaching stratospheric highs.

In October, it became the first worth $5trn (£3.83trn), about the size of the German economy, Europe’s largest, and double the UK’s benchmark stock index, the FTSE 100.

What’s been announced?

Revenue from data centres reached a record high of $51.2bn, more than £10bn higher than the three months previous.

The outlook is for continuing strong sales in the final three months of the financial year, as the company forecasts revenue will be roughly $65bn.

Demand for Nvidia products continues to surpass expectations, while the business is “still in the early innings” of AI transitions, its chief financial officer Colette Kress said.

Mr Huang said sales of its blackwell chips are “off the charts” and its cloud graphics processing chips (GPUs) are “sold out”.

Why it matters

Developing AI infrastructure, like the construction of data centres, has been a significant contributor to US economic growth, as measured by gross domestic product (GDP).

A faltering of AI expansion, therefore, impacts the US economy, the world’s largest, which in turn affects the UK and global economies.

Anxiety around the massive valuations tech companies have accrued, on the hope of AI revolutionising the world, is likely to be staved off by the results announcement.

A fall in these tech company valuations could have meant a drop in the value of pension pots or savings.

Just seven dominant tech companies, many of which have borrowed to invest in AI, make up more than a quarter of major US stock index, the S&P 500.

In the last year alone, Nvidia’s share price has risen more than 230%.

Some, including US trader Michael Burry, famous for being played by Christian Bale in the Hollywood film The Big Short, have effectively bet that Nvidia’s share price would fall.

Addressing the topic of an AI bubble, Nvidia’s founder, Mr Huang, said, “From our vantage point, we see something very different”.

What next?

Regardless of the figures released on Wednesday evening, significant market moves were anticipated, given the attention paid to the results and the significance of the company.

Nvidia shares rose as much as 4% in after-hours trading.

The results also boosted the share price of its chip-making competitors like Broadcom and Advanced Micro Devices.

For now, the AI bubble remains intact.

Business

Budget 2025: Consumer confidence falls as speculation ramps up – but London mayor welcomes major rail investment

Published

16 hours ago

November 20, 2025

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Budget 2025: Consumer confidence falls as speculation ramps up - but London mayor welcomes major rail investment

Consumer confidence has tumbled amid rampant speculation about what the chancellor will announce in the budget, figures show.

The British Retail Consortium (BRC) blamed “strong hints” from the government of income tax hikes for the public’s falling expectations of how much they’ll spend over the next three months – even as Christmas beckons.

While a planned increase in income tax rates was scrapped last week, Sir Keir Starmer has refused to rule out freezing income tax thresholds – which the Conservatives argue amounts to a tax rise by stealth because it drags people into paying higher rates even if their wages increase.

BRC chief executive Helen Dickinson said months of uncertainty had “heightened public concern about their own finances and the wider economy”.

Consumer expectations for the state of the economy over the next three months have fallen significantly to minus 44, down from minus 35 in October, according to data from the BRC and Opinium.

Ms Dickinson said action was needed from Rachel Reeves to “bring down the spiralling cost burden facing retailers”, which she said would “keep price rises in check”.

Signs of ‘fragile’ recovery in jobs market

In slightly more encouraging news for Ms Reeves ahead of her statement next Wednesday, new research suggests the jobs market may be on the up.

The Recruitment and Employment Confederation said the number of new job adverts last month was 754,359, up by 2.1% from September, taking the total to more than 1.6 million.

Ms Reeves’s decision to hike national insurance contributions for employers in last year’s budget was blamed for a slowdown in the market, and a rising unemployment rate.

The report said there has been an increase in adverts for medical radiographers, delivery drivers and couriers, and further education teaching professionals.

But it warned the apparent recovery was “fragile”.

Reeves set to back DLR extension

One man looking forward to the budget is Sir Sadiq Khan, who has welcomed reports that London’s DLR is set to be given funding for an extension.

According to the Press Association, the chancellor will back an extension to the Docklands Light Railway to Thamesmead at a cost of £1.7bn – unlocking thousands of new homes.

Thamesmead has been notoriously short of public transport links ever since it was developed in the 1960s.

The plan would see the line extended from Gallions Reach, near London City Airport, and include a new station at Beckton as well as in Thamesmead itself.

Sir Sadiq said the DLR extension “will not only transform travel in a historically under-served part of the capital but also unlock thousands of new jobs and homes, boosting the economy not just locally but nationally”.

It is also expected to unlock land for 25,000 new homes and up to 10,000 new jobs, along with almost £18bn of private investment in the area.

Business

Nvidia beats expectations again in defiance of AI bubble fears

Published

23 hours ago

November 19, 2025