UK gross domestic product (GDP) in volume terms fell by 2.2% in Quarter 1 (Jan to Mar) 2020, revised downwards by 0.2 percentage points from the first quarterly estimate; the largest fall in UK GDP since Quarter 3 (July to Sept) 1979 when it also fell by 2.2%.
When compared with the same quarter a year ago, UK GDP decreased by 1.7% in Quarter 1 2020, a downward revision of 0.1 percentage points from the previous estimate.
This release captures the first direct effects of the coronavirus (COVID-19) pandemic, and the government measures taken to reduce transmission of the virus.
The services, production and construction sectors provided a negative contribution to growth in the output approach to GDP in Quarter 1 2020; with services output falling by a record 2.3% in the latest quarter.
Household consumption declined by 2.9% in Quarter 1 2020, revised downwards by 1.2 percentage points from the first quarterly estimate; this is now the largest decline in household consumption since Quarter 3 (July to Sept) 1979.
UK GDP increased by 1.5% between 2018 and 2019, revised upwards by 0.1 percentage points from the previous estimate.
The households saving ratio increased to 8.6% in Quarter 1 2020, compared with 6.6% in Quarter 4 (Oct to Dec) 2019.
Gross domestic product (GDP) growth is the main indicator of economic performance. There are three approaches used to measure GDP:
- the output approach
- the expenditure approach
- the income approach
The quarterly national accounts are typically published around 90 days after the end of the quarter. At this stage, the data content of this estimate from the output approach to GDP has risen since the first quarterly estimate, usually to around 90% of the total required for the final output-based estimate. There is also usually around 90% data content available to produce estimates of GDP from the expenditure approach and around 70% data content from the income approach.
However, as a result of the challenges with producing GDP estimates for Quarter 1 (Jan to Mar) 2020, see ‘Impact of the coronavirus’ later in this section, the data content in this release is lower than we would usually expect at this stage (Figure 15, Figure 16). Further information on all three approaches to measuring GDP can be found in the Guide to the UK National Accounts.
Usual practice would have seen the introduction of Value Added Tax (VAT) information for Quarter 4 (Oct to Dec) 2019 for the first time in the output approach to GDP. However, some quality concerns were identified with the VAT information for services and production industries. To allow further time to quality assure the data, we are delaying its introduction until the Blue Book-consistent Quarterly National Accounts published on 30 September 2020. VAT information for construction in Quarter 4 2019 has been included in this release as usual.
There were increased challenges around balancing GDP growth for Quarter 4 2019, in part because of heightened uncertainty around the impact of the UK’s planned exit from the EU on the activity of businesses. This has been reflected in the adjustments that have been applied to the expenditure estimates (Table 5). For this reason, we recommend the breakdown of the expenditure approach to GDP is considered in the context of these adjustments. Further information on these adjustments is available in the Quality and methodology section.
Quarterly sector accounts estimates for March and Quarter 1 (Jan to Mar) 2020 are subject to more uncertainty than usual as a result of the challenges we faced in collecting data during the coronavirus (COVID-19) pandemic. Given the uncertainties in estimating the impact of the pandemic on the accounts, users should be aware of the wider than normal statistical discrepancy between the Rest of the World financial and non-financial accounts.
Data in chained volume measures within this bulletin have had the effect of price changes removed (in other words, the data are deflated), except for income data, which are only available in current prices.
In line with the National Accounts Revisions Policy, revisions are open back to Quarter 1 (Jan to Mar) 2019 as part of this publication.
Impact of the coronavirus
In response to the coronavirus (COVID-19) pandemic, we are working to ensure that we continue to publish economic statistics. For more information please see COVID-19 and the production of statistics.
This release captures the first direct effects of the coronavirus pandemic and the government measures taken to reduce transmission of the virus. Because of the disruption to business and implementation of these government measures, which include restrictions in movement, we faced an increased number of challenges in producing the Quarter 1 (Jan to Mar) 2020 GDP estimate for the UK. These challenges include lower than usual response to surveys that feed into this estimate. For more information on response rates, please see the Quality and methodology section of this release.
More detailed information on the challenges compiling GDP and sector accounts estimates during the coronavirus pandemic, and the steps taken to mitigate them can be found in Coronavirus and the effects on UK GDP and Coronavirus and the effects on the UK Institutional Sector Accounts.
As a result of these challenges, GDP estimates for Quarter 1 2020 are subject to more uncertainty than usual. Users are advised that some components of the three approaches to measuring GDP should be interpreted with caution. More information can be found in the output, expenditure and income sections of this bulletin.
In view of the heightened uncertainty, estimates in this release are likely to have larger than usual revisions in subsequent releases.Back to table of contents
UK gross domestic product (GDP) is estimated to have fallen by a revised 2.2% in Quarter 1 (Jan to Mar) 2020. This is the joint-third largest quarterly contraction in GDP and reflects the imposing of public health restrictions and voluntary social distancing put in place in response to the coronavirus (COVID-19) pandemic.
The decline in the first quarter largely reflects the large fall in output in March 2020, with widespread monthly declines in output across the services, production and construction industries. In comparison with the same quarter a year ago, UK GDP fell by a revised 1.7% (Figure 1).
The Office for National Statistics (ONS) recently published the monthly GDP figures for April 2020, which showed a 10.4% fall in GDP in the three months to April, reflecting the impact of government measures to reduce transmission of COVID-19 on economic activity. It should be noted that the April figures, which were published on 12 June 2020 and which began the production cycle for the first quarterly estimate for Quarter 2 2020, are not consistent with the figures in today’s publication, which uses additional data sources to provide an updated estimate of economic growth in Quarter 1 2020 compared with the first quarterly estimate.
Other countries have published estimates of GDP for the first quarter of 2020, highlighting how the coronavirus pandemic and the response to it has impacted upon the global economy. The Resolution Foundation has highlighted that the size of these effects (PDF, 323KB) will reflect “the duration of the outbreak, the public health restrictions imposed to contain the spread of the virus, and other voluntary social distancing measures that people take to reduce their chances of catching it”.
The Oxford COVID-19 Government Response Tracker captures this information by collecting information on government policy responses to create a “stringency” index. Figure 2 plots the stringency index values in Quarter 1 2020 against the latest estimates of quarterly GDP growth over the same period for a selection of countries. It shows that there is a negative correlation – higher stringency of lockdowns is associated with lower GDP growth.
When compared internationally, it implies that the size of the contraction in the UK economy in Quarter 1 was broadly in line with what might have been expected, given the policies that were in place in the UK in Quarter 1.
Figure 2: Greater stringency of lockdowns is associated with lower GDP growth in the first quarter
Selection of countries, Quarter 1 (Jan to Mar) 2020
In line with the National Accounts Revisions Policy, the dataset is open to revision back to Quarter 1 (Jan to Mar) 2019 as part of this publication. Revisions to the quarterly path of GDP throughout 2019 have been minimal. Annual GDP growth is now estimated to have been 1.5% in 2019.
The implied GDP deflator represents the broadest measure of inflation in the economy, reflecting changes in the price of all goods and services that comprise GDP. This includes the price movements in private and government consumption, investment and the relative price of exports and imports. In the year to Quarter 1 2020, the GDP deflator increased by 2.1%, reflecting growth in the government consumption implied deflator, which was driven by health and education. This marks an upward revision of 0.4 percentage points, mainly reflecting revisions to the government consumption implied deflator as a result of updated NHS data feeding into health. Nominal GDP contracted by 1.2% in Quarter 1 2020.
Table 1 provides an overview of some of the headline economic indicators for the UK.
|Chained volume measures||Current market prices|
Download this table.xlsx .csv
In response to the coronavirus (COVID-19) pandemic, public health restrictions and social distancing measures were put in place in the UK, leading to a widespread disruption to economic activity. These measures have impacted upon the spending behaviours of consumers as well as how businesses and their employees operate. It has also affected the provision of services provided by government, including health and education.
The revisions to Quarter 1 (Jan to Mar) 2020 GDP growth have resulted in revisions to the monthly path through the quarter. In particular, there is now a fall of 6.9% for March, a downwards revision of 1.1 percentage points from the previous estimate. A more detailed breakdown of the monthly estimates will be published in the Monthly GDP release on 14 July 2020, but an indicative monthly path for January, February and March 2020 can be found in the Links to related statistics section of this article.
Services output decreased by a revised 2.3% in Quarter 1 2020, the largest quarterly fall since records began. Production output fell by a revised 1.5% in Quarter 1 2020, driven primarily by declines in manufacturing, while there was a fall in construction output of 1.7% (Figure 3).
Services output contracted by 2.3% in Quarter 1 2020, a downward revision of 0.4 percentage points.
This reflects declines in the output of most industries, notably in education, wholesale and retail trade and repair of motor vehicles and motorcycles, food and beverage, accommodation and travel agencies (Figure 4). A small number of sub-industries – such as computer programming – showed an increase in output.
The decline in services output in the first quarter is reflected in the March IHS Markit UK Services PMI (PDF, 164KB), which reported a survey-record fall in activity caused by business shutdowns and cancelled orders in response to the coronavirus pandemic. Moreover, the Quarter 1 Bank of England Agents' Summary of Business Conditions reported “a sharp decline in spending on consumer services and non-food goods”, adding that the travel, leisure and hospitality sectors were the most affected.
Government and other services fell by a downwardly revised 3.7% in Quarter 1 2020, reflecting revisions to estimates of health and education. Health and social work output is now estimated to have fallen by 4.2%, whilst education output is now estimated to have fallen by 6.0% in the first quarter.
The revision to health output reflects updated information from the NHS whilst the revision to education output is because of improved alignment with government expenditure data. The decline in health output reflects the postponement or cancellation of healthcare treatments as the NHS made preparations to increase it’s critical care capacity in response to the pandemic, whilst the fall in education output was driven by the partial closure of schools from 23 March onwards as part of the UK government's response to the coronavirus pandemic.
Production output fell by a revised 1.5% in Quarter 1 2020 (Figure 5), marking its fourth consecutive quarterly decline.
The fall in the first quarter reflects declines in manufacturing, mining and quarrying, and electricity, gas, steam and air output. The revision to production output growth is largely driven by manufacturing, and in particular the pharmaceutical industry, where new annual data have been taken on.
Manufacturing output fell by 1.1% in the first quarter of 2020, an upwards revision largely reflecting new data on the manufacture of pharmaceutical products.
External survey evidence further corroborates the decline in manufacturing output. The March IHS Markit UK Manufacturing PMI reported that UK manufacturing output fell to its greatest extent since mid-2012 (PDF, 164KB), reflecting “disruption resulting from the coronavirus outbreak, lower market confidence and company shutdowns”. Similarly, the Quarter 1 Bank of England Agents' Summary of Business Conditions stated that “a combination of supply-chain disruption, declining demand and measures to avoid contagion” resulted in a considerable weakening in manufacturing output.
The contraction in manufacturing was driven by decreases in the manufacture of transport equipment, machinery and equipment not elsewhere classified, and textiles. This was partially offset by increases in the manufacture of pharmaceutical, chemical, wood, and rubber and plastic products (Figure 6).
Manufacturing output of transport equipment fell by a revised 7.2% in the first quarter, largely reflecting a 15.2% decline in motor vehicle manufacturing caused by factory shutdowns in March in response to the coronavirus pandemic. This is broadly in line with data from the Society of Motor Manufacturers and Traders (SMMT), which showed a decrease in UK car manufacturing in March because of car plant closures. The SMMT figures show that UK car manufacturing fell by 37.6% in March 2020 compared with the same month in the previous year, with an overall fall of 13.8% in car manufacturing in Quarter 1 2020 compared with the same quarter in 2019.
Meanwhile, the manufacture of pharmaceutical products increased by an upwardly revised 12.5%, driven by stronger than usual demand for medicinal products. However, we were unable to directly identify any coronavirus-related evidence for this increase. There were also increases in the manufacture of chemical products, likely to be reflecting increased demand (in part linked to consumer stockpiling) of soaps and cleaning products in response to the coronavirus pandemic.
Following a decline of 2.2% in Quarter 4 (Oct to Dec) 2019, mining and quarrying output fell 2.1% in the first quarter of 2020. Output of electricity, gas, steam and air fell by an unrevised 5.8% in Quarter 1 2020, driven by a fall in industrial demand for electricity caused by the temporary closures of businesses.
Following a decline of 1.0% in Quarter 4 2019, construction output fell by 1.7% in Quarter 1 2020. Growth in Quarter 4 2019 has been downwardly revised, reflecting updated Value Added Tax (VAT) and survey data, whilst growth in Quarter 1 2020 has been upwardly revised, mainly driven by base effects from the revision to construction output in Quarter 4 2019.
The decline in construction output in the first quarter is corroborated by external evidence, such as the March IHS Markit UK Construction PMI which reported that construction output declined at the steepest rate since April 2009 (PDF, 154KB) because of “stoppages of work on site and a slump in new orders”. It cited the impact of the coronavirus pandemic as the main reason for lower activity, with falls in output across the three broad categories of housing, commercial and civil engineering.
The Quarter 1 Bank of England Agents' Summary of Business Conditions states that construction projects were postponed “either due to economic uncertainty or because of delays caused by planning office closures”, adding that staff absence on some construction sites led to further delays.Back to table of contents
Private consumption, government consumption and net trade are estimated to have had a negative contribution to growth in Quarter 1 (Jan to Mar) 2020, with only gross capital formation contributing positively to growth (Figure 7). The positive contribution from gross capital formation in the first quarter reflects movements in valuables as well as balancing and alignment adjustments.
Household consumption fell by 2.9% in Quarter 1 2020, a downward revision primarily reflecting updated data on clothing and footwear, miscellaneous goods and services, and transport. This marks the largest fall in household consumption since Quarter 3 (July to Sept) 1979.
External survey evidence reinforces this weakness in consumer demand. The GfK interim COVID-19 flash report found that UK consumer confidence fell sharply to negative 34 in the last two weeks of March, stating that “the last time we saw such a decline was during the 2008 economic downturn”.
Compared with the first estimate of gross domestic product (GDP), this release includes updated data from the Retail Sales Index, trade and energy data from the Department for Business, Energy and Industrial Strategy.
Additionally, today’s estimates incorporate data from the Living Costs and Food Survey, though it should be noted that the survey was suspended on 16 March 2020 and hence does not cover the lockdown period for the first quarter. In order to mitigate the impact of this temporary suspension, the Office for National Statistics (ONS) carried out additional analysis to compare the household expenditure estimates with data from business surveys relating to the production of the same goods and services. It should be noted that the Living Costs and Food Survey resumed on 14 April 2020. More information is available in Consumer trends, UK: January to March 2020.
The decline in household consumption in the first quarter reflects falls in spending on transport, restaurants and hotels, and clothing and footwear (Figure 8), in line with expectations of the effects of social distancing that was put in place in March. However, these falls were partially offset by higher spending on food and drink, and to a lesser extent, net tourism, and alcohol and tobacco.
Official retail sales figures point to lower spending on clothing, with a sharp fall in clothing store sales in March as consumers focused their spending on essential purchases such as food. Similarly, the Quarter 1 Bank of England Agents' Summary of Business Conditions stated that there was a “sharp decline in spending on consumer services and non-food goods”, highlighting that the travel, leisure and hospitality sectors were the most affected.
In other external survey evidence, the CBI Distributive Trends Survey reported that “grocers reported exceptionally strong growth in sales volumes in the year to March” because of consumer stockpiling, though “most other sectors reported sharp falls in sales volumes” as households put off purchases of non-essential items. The BRC Retail Sales Monitor for March 2020 also highlights the divergence between food and non-food retail sales, noting that “staying home has seen a surge in sales of food and drink” whilst “non-food categories like fashion have been forced into hibernation.”
The decline in transport spending is in line with Department for Transport figures, which show a decline in transport use in Great Britain during the second half of March as a result of the imposition of social distancing rules. The data show a decline in transport use across motor vehicles, National Rail, the London Underground (Transport for London (TfL)) and bus travel (TfL). Furthermore, data from the Society of Motor Manufacturers and Traders (SMMT) show that new car registrations fell by 44.4% in March, reflecting the closure of showrooms in response to government advice to contain the spread of the coronavirus (COVID-19).
Spending by non-profit institutions serving households (NPISH) declined by 2.8% in Quarter 1 2020, revised from the initial estimate of a 0.8% increase, largely because of revisions to education that are in line with the revisions to government spending on education.
Government consumption fell by a revised 4.1% in Quarter 1 2020, largely driven by revisions to health. This primarily reflects updated information relating to the postponement or cancellation of healthcare treatments as the NHS increased its critical care capacity in its response to dealing with the pandemic.
The decline in government consumption in the first quarter reflects falls in health and education expenditure. In volume terms, government healthcare consumption fell by a revised 6.2% whilst education fell by a revised 6.4% in the first quarter. The initial impact of the coronavirus on government healthcare consumption was mixed, with increased activity in some areas (calls to NHS 111) and reduced activity in other areas (elective operations and accident and emergency).
The fall in estimated education consumption was a result of school closures across the UK, with schools closed to all from 23 March, except for vulnerable pupils or those whose parents or guardians are key workers. We include the education consumed by pupils who are learning at home using materials provided by teachers. For more information on estimates of education consumption in this release please refer to Coronavirus and the impact on measures of UK government education output.
Gross capital formation
Gross fixed capital formation (GFCF) decreased by 1.1% in Quarter 1 2020, reflecting declines in government investment, dwellings investment and business investment (Figure 9). Business investment fell by 0.3% in the first quarter, reflecting falls in investment in other buildings and structures as well as transport equipment, though these were partially offset by increases in investment in information and communication technology (ICT) equipment, and other machinery and equipment.
According to the Quarter 1 Bank of England Agents' Summary of Business Conditions, investment intentions had improved slightly at the start of 2020 following the general election in December 2019. However, the uncertainty created by the coronavirus developments in the last few weeks of the first quarter meant that some companies were “halting investment plans and retaining cash buffers, in particular in retail, leisure, travel and hospitality”, though noting that companies in other sectors were planning to proceed with investment plans aimed at reducing staffing costs and improving efficiency.
The Quarter 1 2020 Decision Maker's Panel reports that “81% of businesses reported that COVID-19 was one of the top three sources of uncertainty for their business”, adding that “the percentage who thought that COVID-19 was an important source of uncertainty for their business in the March survey exceeded the previous peak for Brexit uncertainty of 58%”. Meanwhile, the latest Deloitte CFO Survey stated that business confidence had declined to its lowest ever level, as chief financial officers (CFOs) expect a protracted hit to demand.
Dwellings investment fell by 1.4% in the first quarter of 2020, driven by falls in private sector new housing, and repair and maintenance. Investment was impacted by adverse weather conditions in February 2020 and government restrictions relating to the coronavirus in March 2020. Meanwhile, government investment fell by 3.8% in Quarter 1 2020, revised from the previous estimate of a 1.9% fall.
Alignment and balancing adjustments are typically applied to the inventories component to help balance the different approaches to GDP – more detail on these can be found in the Quality and methodology section of this bulletin. Therefore, the unadjusted data provide a better understanding of the change in the inventory position of businesses. Here, the underlying data show a substantial decrease of £2.7 billion in stocks being held by UK companies in Quarter 1 2020 (Table 2). This was led by a fall in the level of stocks held within the wholesale and retail trades.
Respondent-led evidence suggests that the decline in stock levels in the wholesale industry was largely a result of firms facing increased difficulty obtaining stock from within the UK and abroad whilst some wholesalers reported reduced stock levels because of increased demand from customers further down in the supply chain. Meanwhile, the decline in the level of stocks held within the retail industry was predominantly because of increased consumer spending on household goods, and food and drink.
Evidence from external surveys on business stockpiling was mixed. According to the March IHS Markit UK Manufacturing PMI (PDF, 168KB), pre- and post-production inventory levels decreased in March, reflecting “production delays and longer times taken to receive input purchases”. However, the report adds that “there were some firms that reported attempts to build up stocks in response to the uncertainty caused by COVID-19”. In other survey evidence, the March CBI Industrial Trends Survey stated that stock adequacy in the manufacturing sector was in line with its long-run average.
|Change in inventories|
|2019 Q1||Current price||7,720||309||-1,000||8,411|
|Chained volume measure||6,881||293||1,000||5,588|
|2019 Q2||Current price||2,632||1,848||-500||1,284|
|Chained volume measure||-804||1,742||-2,000||-546|
|2019 Q3||Current price||-3,128||800||500||-4,428|
|Chained volume measure||-5,223||747||500||-6,470|
|2019 Q4||Current price||-1,117||-2,957||-750||2,590|
|Chained volume measure||-2,585||-2,782||-3,750||3,947|
|2020 Q1||Current price||-2,213||1,963||-1,250||-2,926|
|Chained volume measure||-346||1,819||500||-2,665|
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Despite the falls in GFCF and change in inventories, gross capital formation – which includes GFCF, changes in inventories and acquisitions less disposals of valuables – made a positive contribution to GDP growth in the first quarter of 2020. This reflects movements in valuables, which were driven by the large export of non-monetary gold in Quarter 4 2019 and which are offset in the trade in goods figures.
Today's estimates show that the UK posted a trade deficit of 0.2% of nominal GDP in Quarter 1 2020, compared with an initial estimate of 0.9%. This revision reflects downward revisions to import volumes, which more than offset downward revisions to export volumes.
The coronavirus pandemic has led to a marked fall in global trade demand, whilst restrictions have also disrupted international supply chains that might have impacted on the trade intensity of demand. According to the CPB World trade monitor, world trade volumes were 1.4% lower in March 2020 compared with the previous month. The report states that the decline was particularly strong in Europe where trade fell by more than 7% month-on-month, though noting that trade in China “rebounded in March, following a sharp decline in January and a consolidation in February.”
External survey evidence points towards weakened exports activity in the first quarter. The March IHS Markit UK Manufacturing PMI stated that new export business declined at the fastest rate since July 2012 (PDF, 168KB) “as the outbreak of COVID-19 led to lower demand from across the global economy”. According to the monthly CBI Industrial Trends Survey, “manufacturers reported that both total and export order books worsened considerably” in March compared with the previous month. Meanwhile, the latest Quarterly Economic Survey (PDF, 1.03MB) by the British Chambers of Commerce reports that “export activity in the manufacturing sector remained underwhelming”, adding that indicators for export activity in the services sector were at their lowest levels since 2011.
Export volumes fell by 13.5% in the first quarter of 2020, reflecting declines in both trade in goods and trade in services exports (Figure 10). Trade in goods exports declined by 18.7%, reflecting falls in unspecified goods, machinery and transport equipment, miscellaneous manufactures and chemicals, whilst trade in services exports decreased by 7.3%, driven by travel services and intellectual property.
Meanwhile, import volumes decreased by 9.4% in Quarter 1 2020, with falls in both trade in goods and trade in services imports (Figure 11). Trade in goods imports fell by 4.7%, reflecting falls in machinery and transport equipment, miscellaneous manufactures and material manufactures, though these were partially offset by an increase in unspecified goods. Trade in services imports declined by 18.2%, driven by other business services and travel.
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Nominal gross domestic product (GDP) fell by 1.2% in Quarter 1 (Jan to Mar) 2020, revised from the first estimate of a 1.4% fall (Figure 12). This is the largest quarterly fall in nominal GDP since Quarter 1 2009.
Compensation of employees (CoE) increased by 1.1% in Quarter 1 2020. Wages and salaries increased by a downwardly revised 1.0%, because of actual labour market data replacing forecast data. Employers’ social contributions grew by a revised 1.8% in the first quarter. These revisions reflect revised National Insurance data as well as revised data on employers’ contributions to funded pension schemes.
Excluding the alignment adjustment, which is applied to private non-financial corporations (PNFC) gross operating surplus (GOS) in the income approach, GOS of corporations fell by 2.1% in Quarter 1 2020. Once the alignment adjustment is removed, PNFC GOS fell by 3.6% in the first quarter, the second consecutive quarter of decline. Meanwhile, financial corporations’ GOS grew 7.8%, signalling the highest growth rate since Quarter 4 (Oct to Dec) 2017. This was driven by an increase in net spread earnings, reflecting the extreme volatility in markets and elevated trading volumes in the first quarter.
According to the latest EY UK profit warnings report, UK companies issued 301 profit warnings in Quarter 1 2020 (PDF, 1.17MB); this is a 238% increase from Quarter 1 2019 and more than double the previous high in Quarter 4 (Oct to Dec) 2001. The report highlights that 77% of profit warnings cited the coronavirus (COVID-19), with travel and leisure being the most affected industry.
Taxes less subsidies fell by 8.6% in Quarter 1 2020. This represents an upward revision from the first estimate of a 13.6% fall, reflecting updates to the Office for Budget Responsibility (OBR) coronavirus reference scenario as well as updated information on the extent to which Value Added Tax (VAT) receipts were impacted in the first quarter. The updated OBR coronavirus reference scenario (XLS, 718KB), published on 4 June 2020, incorporates updated HM Revenue and Customs weekly outturn data, which point to a lower average grant per job than previously estimated because of an apparent concentration of furloughing among part-time and lower-paid jobs. As a result of these changes as well as other less material changes, the OBR has revised down their estimate of the gross cost of the Coronavirus Job Retention Scheme (CJRS).
Transactions are recorded on an accrual basis within the national accounts. Therefore, whilst payments may not be completed on a cash basis, for reporting purposes the transaction is registered at the point when it was adjudged to take place.Back to table of contents
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None of the countries included within this internal comparison reported positive economic growth in Quarter 1 (Jan to Mar) 2020. This is the first time all countries have experienced negative growth in the same quarter since Quarter 1 2009.
The smallest decline seen over the latest quarter was in Japan, where a 0.6% fall in gross domestic product (GDP) was reported following a 1.9% fall in Quarter 4 (Oct to Dec) 2019. European Union (EU27) economies fell by 3.2% in Quarter 1 2020, which is the weakest growth since Organisation for Economic Co-operation and Development (OECD) records began (Quarter 1 1995).
The estimates quoted in this international comparison section are the latest available estimates at the time of preparation of this statistical bulletin and may subsequently have been revised. The data are gathered from the OECD’s website excluding the data from the UK, which is compiled by the Office for National Statistics.Back to table of contents
As announced in the article Coronavirus and the effects on UK GDP, the Office for National Statistics (ONS) has temporarily withdrawn the comprehensive Quarterly sector accounts (QSA) statistical bulletin, with a brief overview now provided in this bulletin along with the release of a QSA headline bulletin.
The QSA and the associated national accounts statistical compendium, UK Economic Accounts, presents the net lending or borrowing of an institutional sector from both their financial and non-financial accounts as well a number of main economic indicators, including the household sector’s saving ratio. Definitions of these can be found in the QSA headline bulletin. All data in this section are in current (“nominal”) prices meaning that the effect of inflation is included.
Figure 13 shows that in the non-financial accounts, UK net borrowing from the rest of the world increased to 3.9% of gross domestic product (GDP) in the latest quarter. Within this, general government and non-financial corporations saw an increase in their net borrowing positions to negative 4.4% of GDP and negative 2.4% of GDP respectively.
The increase in the net borrowing of general government was driven by the introduction of the Coronavirus Job Retention Scheme (CJRS) late in the quarter, recorded in the UK’s National Accounts as a subsidy paid to the employer, and a fall in Value Added Tax (VAT) based on updated projections of future tax receipts. Gross operating surplus fell by £5 billion, reflecting a broad-based decline in profits across most industries and contributing to increased borrowing by non-financial corporations.
Meanwhile, financial corporations saw a decrease in their net lending position as they increased their acquisition of non-monetary gold. Conversely, the households’ net lending position increased to 2.6% of GDP in Quarter 1 (Jan to Mar) 2020 from 0.8% in Quarter 4 (Oct to Dec) 2019. The reasons for this are now discussed in the context of the households’ saving ratio.
Figure 14 shows that the households’ saving ratio increased markedly to 8.6% in the latest quarter, compared with 6.6% in the previous quarter, as households reduced their consumption spending by £9.5 billion (negative 2.7%). Before adjusting for inflationary effects, this is the largest quarterly fall in household spending since quarterly records began in 1955 and is driven by large falls in expenditure on motor vehicles, restaurants and hotels, and clothing and footwear.
Adding to the decreased spending was an increase in net social benefits other than social transfers in kind (SBOTTIK). The rise in SBOTTIK came from two sources: increased pension receipts and a smaller, broad-based increase in state benefits being paid to households.
In the financial accounts, sectors saw large changes in the value of assets and liabilities they held as the UK and world financial markets anticipated the effects of the global coronavirus (COVID-19) pandemic. The value of listed share liabilities fell by nearly 26% in Quarter 1 2020 in line with the fall in the FTSE All Share index of 1,100 points in the same period as fears over the impact of the pandemic on economic fortunes began to intensify.
At the same time, there were large balance sheet movements in the value of derivatives. The UK’s assets and liabilities of the financial instrument increased by approximately 59%. A similar movement was seen in Quarter 4 2008 in reaction to the worldwide financial crisis. Derivatives are often referred to as “hedging instruments” as they are mostly used for hedging against risk in uncertain times. In Quarter 1 2020, it was thought banks exchanged in financial derivatives because their financial profile might make them vulnerable to losses from changes in the underlying security.
Finally, in the financial account there has been evidence of a “Dash for Cash” as UK monetary financial institutions (MFIs) saw record increases in deposits placed with them on the quarter of £819.6 billion as investors switched to safer investments. In part, these deposits have been funded by the issuance of new loans by UK MFIs. They recorded their highest rise ever in short-term loans of £304.8 billion.Back to table of contents
More quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in the Gross domestic product (GDP) QMI.
The national accounts are drawn together using data from many different sources. This ensures that the national accounts are comprehensive and provide different perspectives on the economy, for example, sales by retailers and purchases by households.
Important quality information
There are common pitfalls in interpreting data series, and these include:
- expectations of accuracy and reliability in early estimates are often too high
- revisions are an inevitable consequence of the trade-off between timeliness and accuracy
- early estimates are based on incomplete data
Very few statistical revisions arise as a result of “errors” in the popular sense of the word. All estimates, by definition, are subject to statistical “error”.
Many different approaches can be used to summarise revisions; the “Accuracy and reliability” section in the Quality and Methodology Information report analyses the mean average revision and the mean absolute revision for GDP estimates over data publication iterations.
Reaching the GDP balance
The different data content and quality of the three approaches – the output approach, the expenditure approach and the income approach – dictates the approach taken in balancing quarterly data. In the UK, there are more data available on output in the short-term than in either of the other two approaches. However, to obtain the best estimate of GDP (the published figure), the estimates from all three approaches are balanced to produce an average, except in the latest two quarters where the output data takes the lead because of its larger data content.
Information on the methods we use for Balancing the output, income and expenditure approaches to measuring GDP is available.
Alignment adjustments, found in Table M of the quarterly national accounts data tables in this release, have a target limit of plus or minus £2,000 million on any quarter. However, in periods where the data sources are particularly difficult to balance, larger alignment adjustments are sometimes needed. This has been the case in Quarter 4 (Oct to Dec) 2019 for expenditure.
To achieve a balanced GDP dataset through alignment, balancing adjustments are applied to the components of GDP where required. They are applied to the individual components where data content is particularly weak in a given quarter because of a higher level of forecast content.
The balancing adjustments applied in this quarter are shown in Table 5, the resulting series should be considered accordingly.
|GDP measurement approach and|
component adjustment applied to
|Q1 2019||Q2 2019||Q3 2019||Q4 2019||Q1 2020|
|Trade in Services (exports)||Current prices||500||-1,000||-1,950|
|Trade in Services (imports)||Current prices||800||1,000||4,500|
|Chained volume measure||250||1,500||4,500|
|Change in inventories||Current prices||-1,000||-500||500||-750||-1,250|
|Chained volume measure||1,000||-2,000||500||-3,750||500|
|Financial corporations GOS||Current prices||-500||500|
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We have applied larger than usual adjustments to the expenditure approach in Quarter 4 (Oct to Dec) 2019 in part after heightened uncertainty around the impact of the UK’s planned exit from the EU on the timing of activity of businesses.
Coronavirus (COVID-19) impact on response rates
Figure 15, Figure 16 and Figure 17 highlight a decline in response rates for surveys that feed into the GDP quarterly national accounts and Quarterly sector accounts estimates for Quarter 1 (Jan to Mar) 2020. We have undertaken a significant amount of work to ensure that the effect on the quality of our estimates are mitigated as much as possible.
This includes focusing resources on main respondents and industries, methodology reviews including but not limited to seasonal adjustment, forecast and imputation, and the use of additional sources of data (in quality assurance). More information on the measures taken can be found in Section 6 of Coronavirus and the effects on UK GDP.
More information on Monthly Business Survey response rates by industry is available.
Quarterly Stocks Survey temporary expansion
The Quarterly Stocks Survey (formerly Inquiry) is used in the compilation of the changes in inventories component. To address users' concerns about the sample size of the survey and the potential impact on quality, we temporarily increased the sample size from 5,500 to 9,500 businesses for Quarter 2 (Apr to June) 2019. We have continued to boost the sample in subsequent quarters and will continue to do so until further notice.Back to table of contents
Contact details for this Statistical bulletin
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