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What do the latest UK data reveal about regional GDP?

New quarterly data reveal an uneven recovery across the nations and regions of the UK. Areas reliant on tourism benefited from the easing of lockdown measures in July-August 2021, but challenges remain as the cost of living crisis takes hold, threatening consumer spending up and down the country.

Gross domestic product (GDP) captures the value of all goods and services produced within a country and is used as a measure for the size of an economy. On 31 May 2022, the Office for National Statistics (ONS) released new data for quarterly GDP growth in each of the UK nations between July and September 2021.

Overall, UK GDP grew by 1.1% in these three months. But the data reveal that output did not rise evenly across the four nations. GDP grew in Northern Ireland, Scotland and England during this period (at 1.5%, 1% and 0.6%, respectively) but shrunk by -0.3% in Wales (see Figure 1).

Figure 1: Quarterly GDP growth (2020 Q1 to 2021 Q3) by UK nation

Source: ONS, Northern Ireland Statistics and Research Agency (NISRA), Scottish Government
Note: Quarterly GDP based on GVA (gross value added); percentage changes are based on chained volume indices of gross value added at basic prices

The dip in Welsh GDP was exceeded by five English regions. Among them, the North East experienced the largest quarterly drop (-1.2%). In contrast, London’s GDP grew by 2.3% in the same period (see Figure 2).

The sectoral breakdown provides a clue as to why this might be the case: accommodation and food services – including hotels and restaurants – were the fastest growing sector in the quarter, with London the best performing region in this sector.

Manufacturing, energy and scientific activity also experienced significant relative declines in the North East. The Midlands and East of England, which also slowed but only by half as much, did not see the same declines in manufacturing.

Figure 2: Quarterly GDP growth (2020 Q1 to 2021 Q3) in England by region

Source: ONS, NISRA, Scottish Government
Note: Quarterly GDP based on GVA (gross value added); percentage changes are based on chained volume indices of gross value added at basic prices

The path of the economy during this period was heavily dictated by the spread of Covid-19 – recall that the Delta variant was the predominant threat at the time. England had the broadest relaxation of rules on 19 July 2021. Scotland also eased restrictions on the same day, but to a lesser extent. Northern Ireland and Wales followed suit on 26 July and 7 August, respectively, but with different controls remaining in place.

In this context, it is not surprising that GDP growth in this quarter was lower compared with the previous one (5.4% overall). The figures for April-June 2021 started from a lower base, and captured the re-opening of pubs, restaurants and non-essential shops after the third national lockdown.

Yet the removal of all social distancing restrictions, face mask obligations and gathering limits (as well as work from home guidance) in England does not appear to show up as exceptional English GDP growth.

Inequalities in the recovery between English regions can also be explained to some extent by the spread of the virus. The Delta variant was particularly prevalent in the North East during July 2021, leading to a five-week support package including greater testing and vaccines from the government. Tourism spending in the South may also have been buoyed by the presence of the delayed Euro 2020 football tournament (with the final held in London on 11 July).

In September 2021, the UK economy remained 1.5% smaller than it had been at the end of 2019 before the pandemic began. An unbalanced recovery across the regions widens pre-existing inequalities, with the North East and Wales the lowest income regions in 2018 and London and the South East the highest.

This supports earlier evidence from the pandemic recovery by John Gathergood and co-authors. They argue that the pandemic has been ‘levelling down’ economic activity due to a quicker recovery in consumer spending in richer regions.

The uneven recovery could be compounded by the cost of living crisis, as households in poorer and lower growth areas of the UK are forced to cut back on spending to be able to afford surging energy and food bills.

Where can I find out more?

  • The quarterly country and regional GDP data from the ONS are available here.
  • The latest annual GDP data for England, Wales and the English regions are available here.
  • Data for Northern Ireland are available here.
  • Data for Scotland are available here.

Who are experts on this question?

  • John Gathergood
  • Stuart McIntyre
  • Michael McMahon
  • Paul Mizen
  • Graeme Roy
Author: Ben Pimley

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