UK growth revised up two years late
The UK economy grew slightly more in 2023 than previously assumed due to a change in how official statisticians calculate research and development (R&D) data, the Office for National Statistics (ONS) said.
Reflecting the difficulties in adding up output and consumption figures, the ONS said it was including new figures on tax data for R&D in its growth estimates.
Researchers said the UK economy was 2.2 per cent above its pre-pandemic peak at the end of 2023, which is higher than a previous 1.9 per cent estimate.
Average annual growth for the period between 1998 and 2023 was left unchanged at 1.8 per cent.
The focus on improving measurements of R&D led to the UK economy appearing bigger every year where fresh calculations were applied and could lead to a “positive contribution to growth over time”.
The ONS also said it was changing sums for “activities of large multinational companies”, including revisions of how it calculates overseas manufacturing.
A review of pharmaceutical companies‘ work took place to understand ownership models and the effects of shipping, leading to these alterations.
“One of the benefits of these improved data on these businesses is that the three measures of GDP – output, income and expenditure – now move a little closer together, as our data on turnover, profits, employment and exports now align better,” said Craig McLaren, head of national accounts at the ONS.
Fresh data on corporation tax returns for 2023 also shows that profits were higher than previously estimated while changes in business inflation figures led to “small” revisions in GDP growth in 2022 and 2023.
The ONS said improvements would ensure it could provide “high quality estimates” of the UK economy.
UK growth depends on AI
While the revisions may point to higher growth under the previous Conservative government than previously thought, economists were quick to point out it would have little impact on the UK’s future growth despite government pledges to invest £86bn in science and technology by 2030.
“We aren’t expecting the government’s reforms to boost the UK’s medium-term growth rate,” Capital Economic’ Paul Dales said.
“Instead, our view that GDP growth in the 2030s will accelerate to around two per cent stems from our optimistic take on artificial intelligence.”