Cheers or jeers for 1.3% economic growth?

UK economy almost back to pre-pandemic levels

By Ricky Browne

Is the glass half full or half empty? When it comes to the economy It depends largely on which side of the political fence you sit on.

Over the last quarter, the British economy grew by some 1.3 percent – which is great as its not in decline, but which is less than impressive as it represents a slow down in the pandemic recovery growth rate. The economy grew by some 5.5 percent in the previous quarter.

For the previous quarter, the UK led the G7 countries, but this quarter the UK has done less well comparatively speaking – except when compared to the United States, which had even lower growth.

Those who see the UK growth rate as positive include (surprise, surprise) Chancellor of the Exchequer Rishi Sunak.

After speaking to a group of economic editors yesterday, Sunak tweeted his synopsis of what was happening.

“The economy continues to recover from Covid and thanks to schemes like furlough, the unemployment rate has fallen for eight months in a row and we’re forecast to have the fastest growth in the G7 this year,” Sunak tweeted.

Opposition shadow chancellor Rachel Reeves didn’t appear to have anything much to tweet about it — but The Guardian, which tends not to support Conservative governments, took a less optimistic view, running an article titled “Sharp slowdown in UK growth lends Sunak’s plan a hollow ring”

“The rise in national income, or GDP, of 1.3% in the three months to September was down from 5.5% in the previous quarter. It meant the recovery from the worst slump in 300 years slowed over the summer and in a troubling development, is now on a much lower trajectory,” The Guardian said.

“It must worry the chancellor, less than a month on from his upbeat declarations in the budget, that the pace of growth has slowed dramatically and that one of his other measures of success, namely how well the country is doing in relation to its G7 counterparts, puts the UK at the bottom of the league,” The Guardian said.

But that isn’t the full story, according to the Conservative-supporting Telegraph, in its article headlined: “Britain’s economic recovery is going better than you think”.

The Telegraph notes that not all seems well on the surface.

“UK GDP in the third quarter was down 2.1pc compared to pre-Covid levels. That is worse than any other G7 nation, with Germany down 1.5pc and Italy 1.4pc. France is almost back to its old level, with its economy just 0.1pc short, while the US leads the pack with an economy 1.4pc bigger than it was in the final quarter of 2019,” it says.

But then it noted: “While it may seem that the UK’s economic recovery is faring far worse than rivals’, direct international comparisons are relatively invalid because the UK measures output in public services, which fell sharply during Covid, when calculating GDP. Most G7 nations simply count the amount of money spent, which tended not to drop amid the pandemic.”

Meanwhile, some other observers are getting excited by pointing to Brexit as the reason why the economy finally isn’t doing as well as anticipated.

“Did you even mention in passing the 4% hit to GDP, according to your own OBR, caused by brexit? Thought not,” tweeted Nick Griffiths in reply to Sunak.

But Peter Millenial replied “I’m no fan of these guys but brexit is a scratch compared to the broken leg that is the reaction to covid.”

He has a point, as given that Covid is still around, it’s still unclear what role Brexit might have had in this slow-down in the recovery rate.

And according to the ONS, the UK economy is almost where it was just before the pandemic.

“Gross domestic product (GDP) is estimated to have grown by 0.6% in September 2021 but remains 0.6% below its pre-coronavirus (COVID-19) pandemic level (February 2020)”, the ONS says.

The growth is actually an increase over the previous two months.

“Monthly real gross domestic product (GDP) grew by 0.6% in September 2021, and follows a revised 0.2% growth in August 2021 (down from 0.4% growth) and a revised 0.2% fall in July 2021 (down from a 0.1% fall).,” the ONS says.

The end result is, yes – the growth rate has slowed in the UK, but at least it is still moving in the right direction – and the pandemic is far from over.

It might be debatable on where the UK stands against other G7 economies – especially as we don’t yet have the quarterly results for Japan and Canada – but all 7 seem to be improving and are well on their way to returning to the GDP levels of 2019, before the pandemic hit.