Taking the temperature of the economy two years into the pandemic [1]: Has the UK economy recovered?

As people take time to reflect on two years of living with the pandemic, I’m frequently being asked, “so are we back to normal?” on various hotly-debated COVID-19 related topics, such as growth, productivity, digital channels, hybrid work, and so on.

Given the war in Ukraine, it’s difficult to answer that question, since the global economy will now be going through another phase of turbulence. However, it is still possible to take stock of various aspects of the UK economy in early 2022. So, over the next few weeks, I’ll be creating a few snapshots of data to see what has changed, what has returned to “normal”, and in what ways we might still be in the midst of a transition.

I’m starting with a very basic question: has the UK economy recovered from the pandemic?

Well, yes — but it has also changed considerably. Official figures show GDP in January 2022 at 0.4% above its level in January 2020. But this aggregate number doesn’t reflect some significant differences across sectors. For example, a large proportion of the recorded recovery has come from the health and social care sector.

The data visualisation above provides a more granular perspective on the recovery. It shows how different parts of the economy have fared by plotting each sector’s output at three different dates — April 2020 (dark blue down arrow), January 2021 (teal blue circle), and January 2022 (black up arrow), relative to a pre-pandemic level in December 2019 (vertical line at 100).

Out of the 14 sectors shown, in January 2022, only 6 had returned to or exceeded the level of output recorded in December 2019.

Admittedly, many of the sectors with a stronger recovery are also large, relative to the UK’s overall output. [The marker size indicates total GVA in each sector in each month shown.] But some major sectors have still not rebounded back to December 2019 levels. These include manufacturing, financial services, and education.

The blue down-arrows give an indication of what each sector has been through: they show the depth of the economic shock in April 2020, when lockdown restrictions were at their strictest and the economy had not yet had time to adjust to new circumstances. Particularly notable are the hospitality (accommodation and food services), arts and entertainment, and other (mainly personal) services sectors. Output in these sectors took a huge hit in April 2020, and remained depressed in January 2022.

It will not have escaped readers’ attention that those sectors are also ones that tend to disproportionately employ lower-paid workers, for whom the pandemic has been particularly challenging. I’ll return to the shifts that have taken place in the labour market in future editions of this blog.