Last week The Spectator highlighted new data from the OECD that offers a weekly update comparing a country’s current GDP levels to the previous year. It continues to show the UK experiencing some of the highest levels of economic damage. If you factor in lockdown stringency, you can also make out a rough correlation between countries under the strictest lockdowns and countries taking the biggest hits to GDP.
Just how reliable are these calculations? A cross-check between the OECD data and the Office for National Statistics’ monthly GDP update would suggest it’s pretty spot-on, if not slightly more positive. Today’s update from the ONS shows the economy to be 9.2 per cent below where it was in January 2020. This roughly mirrors the OECD’s weekly estimates for January, placing the economy around 8.5 per cent smaller than the year before. If the ONS data continues in line with the OECD, this would suggest the ONS’s February’s update will place the UK economy somewhere around 7.8 per cent smaller than it was last year.
The ability to calculate this data weekly and then sense-check it against the ONS’s monthly data enables a far more honest conversation to take place about the trade-offs of having one of the strictest lockdowns in the OECD. Much of today’s commentary around the ONS’s data drop is that this snapshot of data is already in the past: that this is likely to be the lowest point for the economy in 2021 as the vaccine miracle takes hold and society starts to reopen.
While this is hopefully true, it implies perhaps too much that things are on the up: a quick look at the first graph above and you can see, in something much closer to real-time, that compared to other developed countries the UK is still struggling with its recovery more than most, sluggish in its climb back to pre-pandemic levels.
It’s not all bad news: while the economy was expected to contract after the January lockdown was announced, its fall was not nearly as bad as expected. Economic consensus expected a 5 per cent dip, yet the ONS reports only a 3 per cent fall, which (unlike England’s November lockdown) factors in the impact of school closures as well. Today’s data continues to bolster the argument that businesses have developed some level of lockdown immunity, adapting to restricted circumstances to make them more viable than they were when the first lockdown came last March.
But the combination of today’s ONS figures and the weekly OECD figures suggest that there is a ceiling on recovery: the UK economy will be stuck significantly below its pre-pandemic levels until lockdown eases significantly. That the UK has the second-lowest level of Covid infections in Europe — and one of the most successful vaccine rollout programmes in the world — makes the political decision to also have one of the strictest lockdowns in the world increasingly difficult to explain.
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