Gross Domestic Product (GDP) is the most important measure of our economic success. GDP is a way to measure the total value of goods and services produced within a country. In the United Kingdom, GDP can be assessed through three primary methods: Output, Expenditure, and Income. As discussed above, each of these approaches offers different and highly valuable perspectives on the economy, allowing policymakers and economic analysts to assess how well our economy is performing.
This Output measure leads everyone to prioritize the value produced by every sector of the economy, using the entirety of the economic pie. This method includes data across many different industries making it hard to get a clear picture of production rates. At the same time, the Expenditure measure includes all of the spending on all goods and services in the U.S. by households, government, and businesses. This metric includes investments in machinery and buildings, exports, and subtracts imports to present a net figure that reflects overall economic activity.
The Income measure is concerned primarily with the money produced in that economy. In addition, it overly prioritizes profits over wages. This makes it possible to see how economic output turns into dollars earned by people and profit margins for businesses. In the UK, for example, the Office for National Statistics (ONS) routinely tracks alternative GDP figures. This makes it possible for real-time assessments of economic performance.
At least one thing ONS is praised for is its speed in producing these GDP estimates. To do so, it typically only releases estimates 40 days after the end of that quarter. Since 2010, they incorporated well-being indicators into traditional measurements of economic growth. That’s because this shift is indicative of a more holistic understanding of what national prosperity looks like.
In practice, the ONS reconciles into one measure of GDP, a single, comprehensive measure that accounts for all three approaches. These first round estimates tend to be dependent on the Output measure, which is based on rigorous data collection throughout thousands of firms across an incredibly diverse sector. This multi-faceted approach allows the ONS to produce a more nuanced and holistic estimate of the true economic performance.
GDP growth is a continuing top priority for the UK government. Economic growth has been the newly elected Labour government’s key economic priority since being swept into power in July 2024. Such growth is essential as two quarters of negative GDP growth can be a signal that the nation’s economy has entered a recession. The impact of this downturn can be grave – leading to pay freezes and job losses both immediately and in future years.
The latest economic data shows that the UK economy experienced 0.3% growth in the last three months to June 2024. This huge expansion was even greater than first forecasts by consultants and academics. This growth was offset by a much more modest overall increase of just 0.1% during the July-to-September period. In September, the British economy shrank by 0.1%. This came as a shock to many analysts who had predicted a 0.2% growth rate for the quarter.
Not withstanding this rollercoaster ride though, an essential buoyancy is felt in return to forecast of future growth – sunny uplands ahead. The International Monetary Fund (IMF) has only recently raised its forecast for UK GDP growth. It now forecasts a 1.3% increase for 2025. This improved forecast reaffirms an expected comeback, as business conditions continue to change.