UK Economy Shows Unexpected Growth in 2023, Revised Data Reveals

The UK economy experienced a significant upward revision in its growth rate for 2023, according to the latest figures released by the Office for National Statistics (ONS). The revised data indicates that the economy grew by 0.3% last year, a substantial increase from the previously reported figure of 0.1%.

This revision follows the collection of more comprehensive data on wages and corporate profits, providing a clearer picture of the economic landscape. Despite this unexpected growth, the UK remains one of the slowest-growing economies in the G7, with Germany being the only nation to fare worse, experiencing a contraction of 0.1% during the same period.

The improved economic performance is likely to spark debate over the Labour government’s assertions of inheriting the worst economic situation from the previous Conservative administration since World War II. However, the ONS also adjusted its GDP growth forecast for the second quarter of 2024 down to 0.5%, slightly lower than the earlier estimate of 0.6%. This adjustment underscores the challenges facing the economy as Sir Keir Starmer took office in July.

The Organisation for Economic Co-operation and Development (OECD) predicts a modest recovery for the UK economy, forecasting a growth rate of 1.1% for this year. Gora Suri, an economist at PwC, highlighted that while the GDP growth for the second quarter was slightly below initial estimates, the overall economic outlook has improved due to lower inflation, decreasing interest rates, and enhanced political stability following the general election.

Real GDP per capita, a more accurate indicator of living standards, increased by 0.2% in the three months leading to June, though it remains 0.3% lower than the same period last year. Disposable incomes also saw a 1.3% rise in the second quarter, down from a 1.6% increase in the previous quarter.

Notably, the household savings ratio experienced a significant boost, reaching 10% in the second quarter, up from 8.9% in the first quarter, according to the ONS.

Liz McKeown, Director of Economic Statistics at the ONS, explained that the revised GDP figures for 2023 and 2024 incorporate new annual survey data, VAT returns, and updated industry size estimates. However, she cautioned that the overall growth trajectory for the last 18 months remains largely unchanged.

The ONS has faced criticism in the past for underestimating the strength of the UK’s post-Covid recovery, and concerns have been raised regarding the accuracy of its labour market data amid declining survey response rates.