Glimmer of good news as UK economy ISN’T in recession (yet)

The UK economy might not officially be in recession after revised figures showed it stayed in the black in the second quarter.

Initial estimates suggested that GDP fell by 0.1 per cent between April and June – but that has now been tweaked to 0.2 per cent growth.

As a result UK plc might not be in a technical recession – defined as two quarters of decline in a row – as the Bank of England said earlier this month.

However, the improved number for April-June was largely down to a grimmer assessment of the previous performance, with the economy still smaller than before the Covid crisis.

The Office for National Statistics (ONS) now believes the pandemic triggered an 11 per cent slump in 2020, rather than the 9.3 per cent pencilled in before.

That once again makes it the biggest since the Great Frost in 1709 – as the post-First World War recession was 9.7 per cent. Previous revisions had downgraded the size of the hit from its initial status as the biggest in 300 years.

Rather than being 0.6 per cent bigger than before Covid, the ONS’s latest estimate is that GDP is 0.2 per cent lower. 

As a result the body said the UK is the only G7 country not to have clawed back the ground from Covid.   

The Bank of England implied the UK was currently in recession last week when it forecast another decline of 0.2 per cent for the three months to September.

However, the new figures from the ONS mean that, even if the economy declines as predicted this quarter, it will not yet be in recession.

The ONS said the upwards revision was driven by improvements for the health and financial sectors.

ONS chief economist Grant Fitzner said: ‘These improved figures show the economy grew in the second quarter, revised up from a small fall.

‘They also show that, while household savings fell back in the most recent quarter, households saved more than we previously estimated during and after the pandemic.’