GDP revisions: UK economy suffers worst decline in 300 years but autumn bounce-back stronger than thought

The UK economy suffered a steeper contraction during the first coronavirus lockdown but bounced back more strongly than previously thought at the end of 2020, official figures have revealed.

The Office for National Statistics (ONS) said gross domestic product (GDP) – a measure of the size of the economy – shrank by even more than first forecast between April and June last year, tumbling by 19.5 per cent against the 19 per cent initial estimate.

However, in a raft of revisions to previous figures, the ONS said the economy rebounded by 16.9 per cent and 1.3 per cent in the third and fourth quarters of 2020 respectively. This marked increases on the 16.1 per cent and 1 per cent previous estimates.

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The widespread revisions left GDP falling by 9.8 per cent overall in 2020, against the 9.9 per cent first pencilled in, but still marking the worst annual performance for more than 300 years.

The widespread revisions left GDP falling by 9.8 per cent overall in 2020, against the 9.9 per cent first pencilled in, but still marking the worst annual performance for more than 300 years as the pandemic battered the UK economy. Picture: Tim Goode/PA
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Jonathan Athow, deputy national statistician at the ONS, said: “Our revised quarterly figures show the economy shrank a little more than previously estimated in the initial stages of the pandemic, before recovering slightly more strongly in the second half of last year.

“However, these new estimates paint the same overall picture as before, with historically large falls in GDP in the spring, followed by a recovery in the summer and autumn.”

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Due to the upward revision to figures for the final three months of 2020, the level of GDP was 7.3 per cent below that of a year earlier, against a previous estimate of 7.8 per cent.

The 9.8 per cent annual drop marks the steepest since official records began, while historical figures from the Bank of England suggest it is the biggest contraction since the Great Frost of 1709.

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But the ONS stressed that its GDP estimates are “subject to more uncertainty than usual” and likely to have larger-than-normal revisions due to the challenges of collecting data in the pandemic.

Rupert Thompson, chief investment officer at wealth management group Kingswood, said: “The string of better-than-expected news on the UK economy continues.

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“Activity recovered more in the fourth quarter than was initially reported with the gain in GDP revised up to 1.3 per cent from 1 per cent, quarter on quarter.

“This follows the recent stronger-than-expected numbers for business confidence which suggest the contraction in the first quarter will be smaller than first feared. Meanwhile, the fast vaccine roll-out has bolstered hopes of a rapid rebound over coming months.”

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The UK economy suffered among the largest contractions of all the countries in the Organisation for Economic Co-operation and Development (OECD), with only Spain and Argentina seeing steeper falls.

In separate figures, the ONS said the UK current account deficit – the difference between the value of the goods and services the UK imports and the goods and services it exports – widened to £26.3 billion in the fourth quarter of 2020.

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This is equivalent to 4.8 per cent of Britain’s GDP and is almost twice the level seen in the previous three months as firms stockpiled imports ahead of the December 31 Brexit deadline.

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