UK economy made stronger recovery during Covid

The UK economy made a stronger recovery during Covid at the end of 2021 than previously estimated, according to sharply revised official figures.

Data has now revealed that the economy was 0.6% bigger in the final three months of 2021 compared to pre-pandemic levels.

The previous figures said that the UK economy was 1.2% smaller.

The government said it showed "those determined to talk down the British economy have been proved wrong".

The Office for National Statistics said changes were mainly because it had "richer data" from its annual survey.

The revised figures also show the pandemic lockdown collapse in the economy was smaller than thought in 2020, with output declining by 10.4% rather than 11%.

The recovery in 2021 was also faster with growth of 8.7% rather than 7.6%.

Recently, the ONS estimated that between April and June this year, the UK economy was still 0.2% smaller than the final three months of 2019 - the last full quarter before Covid struck the following March.

This meant the UK was at the bottom of the biggest G7 economies in terms of its recovery from the pandemic.

However, the upward revision could now mean that the UK economy is performing much better than Germany and is only just behind France and Italy when the ONS releases its latest figures.

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 of families."

'Lasting impact'

While the difference between how much the UK economy shrank and grew at the end of 2021 is huge, it needs to be viewed in the context of massive pandemic swings.

The ONS said a key reason for the change was that companies had piled up unsold stocks in the pandemic rather than run them down.

It also increased its calculation for output by health services, notably the NHS.

The net result of all this is that by 2022, the UK was not the outlier within the G7 in terms of the damage done by the pandemic. In fact, the UK economy was hit pretty much in line with the other major European nations.

Only the UK and the US have made any changes to their 2021 economic data.

The likes of Germany, France and Italy have not. If they choose to, it could show their economic performance was worse than initially thought - or better.

Nonetheless, the revision by the ONS gives an important insight into the lasting impact of the pandemic on the UK economy.

It was impacted less than originally feared. But it does not tell us much about the economy right now, hit by an energy shock and rising interest rates, which occurred almost entirely after this revision.