In May 2021, UK gross domestic product grew for the fourth consecutive month, increasing by 0.8%. Pubs, restaurants and hotels jumped by almost 40% with cold weather acting as a boost for energy producers. Despite sustained growth, UK GDP is still 3.1% below pre-pandemic levels.
According to the latest data from the Office for National Statistics (ONS), the UK’s gross domestic product (GDP) – the total value of the goods and services produced – grew by 0.8% in May 2021. This is the fourth consecutive month that the economy has grown (see Figure 1).
Figure 1: UK Monthly GDP (January 2007 to May 2021), 2018 = 100
The data show that the service sector grew by 0.9%. Output in the production sector (where raw materials are extracted and made into tangible goods) also returned to growth (0.8%), following a 1% fall in April. The construction sector contracted for a second consecutive month (by 0.8%) but remains the only sector to have grown above its pre-pandemic level. In contrast, the manufacturing sector saw output fall by 0.1%, following microchip shortages which have disrupted car production.
The partial easing of lockdown measures in England and Wales on 17 May helped drive service sector growth. Pubs, restaurants and hotels reopening led to 37.1% growth in food services and accommodation, although this was slightly offset by a 5.7% fall in output for food shops, as people made the switch from cooking at home to eating out.
The weather also played a part in changing consumer behaviour, affecting industries differently. An unusually cold May drove up demand for electricity, gas and air conditioning, contributing to a 0.8% growth rate in the energy production sector, bouncing back from the 1% fall in April.
Lockdown also provided an opportunity for people and businesses to maintain and repair their properties. This fuelled a mini construction boom in February and March 2021, with output in this sector rising to above pre-pandemic levels. But this exceptional growth led to a shortage of supply for raw materials, increasing prices of building supplies such as timber and steel, causing the sector to contract in April and May, by 0.7% and 0.8% respectively. Despite this fall, construction remains the only sector where businesses are operating above February 2020 levels.
Four months of consecutive GDP growth is promising, but how far is the UK economy from being ‘back to normal’? The third column of Table 1 shows the difference in output from February 2020 to May 2021. GDP is currently 3.1% below what it was before the crisis, but with this recent consistent growth, the UK economy should surpass pre-pandemic levels in around three to four months. Crucially, the impact of Covid-19 on output varies for each area of the economy. Any lasting sector-specific damage will become clearer as the economy continues to recover.
Table 1: Monthly growth and percentage change in output since the pre-pandemic level in February 2020
|Change in Output||March to April 2021||April to May 2021||February 2020 to May 2021|
Finally, it is useful to explore how the UK compares with other countries. In March, the OECD predicted that the UK economy would grow 7.2% this year, more than any other country in the G7 (6.9% growth is predicted in the United States, and 4.3% in the Eurozone). But this may be deceivingly optimistic: as of March 2021, the UK had the worst real GDP percentage change (-8.8%) of all the G7 countries compared with pre-pandemic levels.
It is uncertain whether the UK will meet the OECD’s predictions, but the current data are encouraging. The effects on GDP of a third wave of coronavirus cases, the postponement of the final stage of lockdown easing and the sustained impact of Brexit will be visible in the data to come, providing a sharper picture of the ‘beginning of the end’ of the crisis.
Where can I find out more?
- This data release from the ONS provides more detail on the latest trends in UK GDP.
- Previous releases are also available here.
Who are experts on this question?
- Nick Bloom, Stanford University
- Paul Mizen, The University of Nottingham
- Michael McMahon, Oxford University