UK economy grew faster than expected in Q1, according to new ONS figures

The UK economy grew faster that expected between January and March this year, new revised official figures have suggested.

Richard Carter of Quilter Cheviot says: 'The economy may be holding up just now, but it is asking a lot for it to continue to do so for quite so long.' Picture: Jeff J Mitchell/Getty Images.

The Office for National Statistics (ONS) said it now thinks gross domestic product (GDP) rose by 0.3 per cent in the first three months of the year, up from the 0.1 per cent previously estimated. The ONS left its estimate for the second quarter of the year unchanged.

ONS chief economist Grant Fitzner said: "Our new estimates indicate a stronger performance for professional and scientific businesses due to improved data sources. Meanwhile, healthcare grew less because of new near real-time information showing the cost of delivering services."

It means the UK economy is now expected to have grown by 1.8 per cent between the final quarter of 2019 and the second quarter of this year. That puts the country's economy ahead of both Germany (0.2 per cent) and France (1.7 per cent) during the same period. But it is still behind Italy (2.1 per cent), Canada (3.5 per cent), Japan (3 per cent) and the US (6.1 per cent).

A previous estimate had shown that the UK's economy shrank by 0.5 per cent during that period, the joint-worst performance with Germany out of the aforementioned countries. It comes following a series of revisions to GDP estimates, which were made much more difficult during the pandemic and energy crisis.

Earlier this month, the ONS said it now thinks GDP returned to its pre-pandemic level by the last three months of 2021, much earlier than first thought. The ONS made the revisions after accessing new data. Taken together, recent revisions mean GDP is around 2 per cent higher than thought to be previously. The upgrade to the first quarter of this year was largely because of new data from the health and education sector and revised VAT figures, the ONS said.

Jake Finney, an economist at consultancy giant PwC, said: "Unfortunately this snapshot of economic data is not significant enough to change the overall picture of a flatlining economy. Output is only 0.4 per cent higher than... at the same time a year ago. If anything, the GDP data revisions may marginally dampen the UK's growth prospects for 2023 and 2024 as they reduce the potential for bounce-back growth."

Chancellor of the Exchequer Jeremy Hunt said: "We know that the British economy recovered faster from the pandemic than anyone previously thought and data out today once again proves the doubters wrong. Since 2020 we have grown faster than France and Germany. The best way to continue this growth is to stick to our plan to halve inflation this year, with the IMF forecasting that we will grow more than Germany, France, and Italy in the longer term."

Richard Carter, head of fixed interest research at Quilter Cheviot, said the new GDP data gives some hope that a recession can still be avoided by the UK. However, he added: “The [Bank of England] has an incredibly difficult job to do, and with next year likely to see a general election at the same time, they won’t want to overcorrect and tip the balance of power one way or another. The economy may be holding up just now, but it is asking a lot for it to continue to do so for quite so long.”