(Wed 03/09/14 19:12:52)
LONDON (Sept 03): Britain's economy has grown at a stronger rate than previously estimated over the last few years, according to new figures that could be a boon for Britain's government ahead of elections next year.
The Office for National Statistics is revamping how it calculates the size of Britain's economy, and on Wednesday published new estimates of gross domestic product from 1998 to 2012.
The revisions, which reflect European Union-wide changes to national accounts, show the economy grew more strongly than thought in the years after Britain's coalition government came to power in 2010.
The ONS now estimates the economy grew 1.6 percent in 2011 compared with its previous estimate of 1.1 percent. In 2012, the economy grew 0.7 percent, against 0.3 percent previously.
Britain's finance ministry said the new figures could mean the economy was now around 2.7 percent larger than its pre-financial crisis peak, instead of the 0.2 percent currently estimated.
"These ONS revisions show an economy that has been growing more strongly than previously thought, with almost every quarter under this government being revised upward," said a finance ministry spokesman.
The economy is the key battleground ahead of next May's general election.
The Conservative Party hopes the strength of the recovery will persuade voters to return them to power, but opposition Labour — ahead in the polls — says most Britons have felt little benefit from the upturn.
The ONS said the broad picture since 1998 had not changed much because of the revisions.
"Although the (2008-09) downturn was less deep than previously estimated and subsequent growth stronger, it remains the case that the UK experienced the deepest recession since ONS records began in 1948 and the subsequent recovery has been unusually slow," said Joe Grice, the ONS chief economist.
The revisions reflect EU-wide changes in what is considered the best way to represent the size of the economy - for example, by treating corporate research as output rather than a cost.
They also include more eye-catching changes, such as estimates of the activity of prostitutes and drug dealers.
Michael Saunders, chief UK economist at Citi, said the revisions were not just of historic interest because they probably suggest the economy has more momentum than Bank of England policymakers believe.
"This would imply a higher growth outlook, and hence also indicate that slack probably should continue to shrink rapidly. All this would tend to make the Monetary Policy Committee more likely to hike earlier rather than later," he said.
The consensus of economists polled by Reuters shows the BoE will hike interest rates from a record low 0.5 percent early next year.
While the revisions raised the level of GDP between 1998 and 2012 by an average of around 50 billion pounds ($82 billion) a year at current prices, the annual average growth rate was little changed at 2 percent - or 0.1 percent higher than before.
The ONS also announced revisions to Britain's balance of payments from 1997 to 2009. It said the changes were small apart from 2008 and 2009 - at the height of the financial crisis. The current account deficit widens significantly for these years because of changes to the way banks' profits are included in foreign direct investment.
(1 US dollar = 0.6066 British pound)