National Statistical

Today we’ve released our annual revisions of the UK’s Gross Domestic Product (GDP) covering the period up to 2022. As more data have become available we’ve been able to refine our initial estimates of economic activity and update our assumptions about the relative size of each sector since the pandemic. Craig McLaren explains this regular process and how the picture of the economy as a whole has changed. 

The last few years have been challenging for national statistical institutes around the world due to the measurement difficulties posed by the impact of the pandemic. Like the UK, many countries have significantly revised their initial estimates of the sharp economic contraction COVID brought and the scale of the subsequent recovery as some normality returned.

Revisions are a regular, essential part of the process of producing high quality GDP estimates, something we explored in more detail in our podcast on communicating uncertainty released in March.

What’s changed this time?  

While this year the revisions for 2020 and 2021 are very small, we have seen our estimate for 2022 rise from 4.3% to 4.8%, which is a little larger than usual.

This reflects the more comprehensive annual survey responses – that take a while to collect and process – showing the economy did better than our initial estimates suggested, as well as the sizeable changes in the way the economy now operates since the COVID-19 pandemic. If we compare revisions as a proportion of growth in the relevant year, the revision in 2022 is only slightly larger than the historical average.

Sectoral shifts in the economy 

In addition, we have updated our assumptions about the ‘weight’ we give each industry within GDP for the first time since the COVID-19 pandemic. While we usually update these annually, using weights for the pandemic years when much of the economy was closed or operating very differently, would have skewed our overall estimates.

International guidance from the IMF at the time noted this challenge and recommended pausing weighting updates until activity had settled into a post COVID norm. While the UK generally updates the weights on an annual basis, other countries can take up to five years to make these changes, which need to be considered when making international comparisons.

So today we’ve updated the weights for the first time since 2019, which has had a notable impact on our estimates, given the significant changes to how our economy has operated due to both the pandemic and impact of Russia’s invasion of Ukraine.

For example, we have seen big rises in the weight of mining and quarrying – given the large increase in gas and oil prices, and this sector is now larger in 2022 relative to other sectors.

In addition, the health sector, which increased its share of economic activity a lot during the pandemic, remains larger in 2022 than its long-term average as the sector catches up post-pandemic.

Conversely manufacturing, which is now seeing significantly increased costs and therefore adding less to the economy overall, and the accommodation and food sector, which was hit hard in the pandemic and has still not returned to pre-pandemic levels in 2022, are both relatively smaller than they were in 2019.

Next Steps

These figures have gone through our comprehensive annual ‘supply use’ balancing process that allows us to confront and reconcile all of our different data sources. However, at this point they can only be produced up to 2022, as it takes us several years to receive and process all the information we need to undergo this process.

The ONS remains committed, however, to improving early access to key datasets so that more data are available faster and uncertainty in our earlier estimates is reduced.

Recent revisions have reflected the widespread challenges of estimation during the pandemic period and recovery. While previous analysis shows that if you look at revisions outside of the pandemic period, they are on average both small and unbiased, this has not always been the case for the pandemic period. We will explore this in more detail when we update our usual analysis of revisions  in the autumn.

On 30 September, we will be extending these revisions to include the latest periods when we will bring our 2023 and 2024 GDP estimates into line with today’s updated and reweighted data, which will also include additional data.

We look forward to sharing these new statistics when our fully revised GDP dataset – as part of the 2024 Blue Book dataset – is published in September this year.

Craig McLaren, Head of National Accounts