UK economy grows by 1.3% – but the country gets close to pre-pandemic health

The UK economy expanded by 1.3% in the final three months of 2021, the latest figures reveal.

The UK's gross domestic product (GDP) is now 0.1% where it was at the start of the Covid pandemic, the Office for National Statistics (ONS) said today.

GDP is the value of all the UK's goods and services if lumped together and given a number in pounds.

The forecast was for 1% in Q4, so the economy has grown slightly faster than expected.

The main reasons for economic growth in Q4 last year were increased visits to doctors, a big increase in Covid test and trace activities and the vaccine programme.

Other big reasons behind the growth were increased visits to travel agents and employment agencies in the last three months of 2021.

But Brits also saved slightly less money in the last quarter of 2021 due to the cost of living crisis.

Why is UK inflation so high, what is the rate and will it keep rising as living costs soar

ONS director of economic statistics Darren Morgan said: "Savings were at their lowest level since the start of the pandemic as household spending rose, mainly driven by rising prices."

The ONS said the average British household saved 6.8% of its income in Q4 last year, down from 7.5% in May to July.

This means for every £100 earned, the average household saved £6.80 in the last three months of 2021, compared to £7.50 in the three months before.

However, looking at December alone GDP fell by 0.2% despite the Christmas shopping rush, due to the Omicron strain of Covid hitting businesses.

Retail and hospitality were especially badly affected, the ONS said, but sectors like transport grew due to an increase in online shopping.

GDP for the whole of 2021 was 7.4%, down from a predicted 7.5%.

But this follows a 9.3% fall in 2020, due to the effects of Covid.

The economies of countries like France, the US and Canada are now above their pre-Covid levels.

The UK's economy grew faster than those of France, Germany, Spain, Italy and Japan in the year to Q4 2021.

Food prices rising at fastest level in a decade – see 10 items rising the most

However, factoring in inflation the UK's GDP actually fell by 0.1% in the period, though that is still better than Germany, Spain, Italy and Japan.

UK inflation hit 6.2% earlier this month, the highest level in 30 years.

Inflation is the rate at which prices rise. If a bottle of milk costs £1 and that rises by 5p, then milk inflation is 5%.

Since December last year, prices have been rising at their fastest rate since the 1990s. Inflation is expected to accelerate from midnight on April 1, when the energy price cap is lifted.

This cap is set by regulator Ofgem and limits how much the average home on a default tariff can be charged for energy a year.

About The Author