Britain never had a double dip recession – and that doesn't matter

The magic of GDP revisions.

The ONS has released a bumper set of GDP revisions, taking a fresh look at the national output all the way back to 1997. The headline points:

  • The recession in 2009 was much more severe than previously thought. The agency has revised its estimate of the 2009 contraction from 4 per cent of GDP to 5.2 per cent; an increase of a third.
  • A change of 0.1 percentage points has erased the "double-dip" recession in 2011. The contractions in Q4 2011 and Q2 2012 still exist, but Q1 2012 is now estimated to have had exactly 0.0 per cent growth; the wiggle thus no longer qualifies as a technical recession.
  • Historically, the 2001 slump after the dot-com boom also appears to have been much worse than previously thought. Rather than the economy growing by 2.9 per cent that year, it grew by 2.2 per cent, a revision of 0.7 percentage points.

The immediate effect of the revision is political. The double-dip recession has been extraordinarily damaging for the Government, allowing the Opposition a concrete fact to point to to back up the claims that they "inherited growth and provided recession". The revisions eliminate the negative growth in one quarter, and mean that that period no longer meets the requirement of two or more consecutive quarters of negative growth which defines a recession.

But that is a technicality of the highest order. The estimate for growth over those three quarters combined is exactly the same as it was yesterday: a contraction of 0.6 per cent. All that has happened is that the timing of some of that contraction has shifted. Q2 2012 is now thought to be marginally worse, and Q1 2012 is now thought to be marginally better.

In other words, as I said back in April 2012, technical recessions don't matter. They impose an artificial dividing line between "good" and "bad" growth, when in fact, going by yesterday's stats or today's, that period is and always was mediocre. Horribly, cripplingly mediocre.

Anaemic growth is just as bad as a technical recession. In many ways, it's worse; whereas technical recessions are at least expected to end, the stagnation which we are living at the moment has stretched out for almost half a decade, and could well last almost half a decade more.

The more interesting fact is that the recession and depression have been massively increased in size. Since 2008, the economy has actually contracted by 1.1 per cent more than we thought. That increases the so-called "productivity puzzle": why has unemployment been falling while GDP hasn't been increasing? That puzzle is partially solved with the realisation that the labour market improvement stopped six months ago; but there still appears to be a disconnect between the two measures. The commonly cited solution to the puzzle is to argue that labour productivity has dropped; but even that just pushes the question further down the tree. Why is our productivity down so much?

But the number one take-home lesson from all of this is: GDP is actually kind of crappy. It's estimated from samples several steps removed from actually "measuring the size of the economy". It misses out huge sectors of the economy, from unpaid caring and parenting to increasingly mainstream aspects of the shadow economy like transactions in bitcoin. And it's wrong; sometimes for decades on end.

Perhaps we should take the advice of former MPC member Andrew Sentence (who has been predicting this recession would be revised out of existence for a year), and focus on more important and less volatile indicators like unemployment and business activity. Not only would that reduce the risk of rewriting history: it would also mean that doing well could no longer be defined as "not failing".

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Ukip's Nigel Farage and Paul Nuttall. Photo: Getty
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Is the general election 2017 the end of Ukip?

Ukip led the way to Brexit, but now the party is on less than 10 per cent in the polls. 

Ukip could be finished. Ukip has only ever had two MPs, but it held an outside influence on politics: without it, we’d probably never have had the EU referendum. But Brexit has turned Ukip into a single-issue party without an issue. Ukip’s sole remaining MP, Douglas Carswell, left the party in March 2017, and told Sky News’ Adam Boulton that there was “no point” to the party anymore. 

Not everyone in Ukip has given up, though: Nigel Farage told Peston on Sunday that Ukip “will survive”, and current leader Paul Nuttall will be contesting a seat this year. But Ukip is standing in fewer constituencies than last time thanks to a shortage of both money and people. Who benefits if Ukip is finished? It’s likely to be the Tories. 

Is Ukip finished? 

What are Ukip's poll ratings?

Ukip’s poll ratings peaked in June 2016 at 16 per cent. Since the leave campaign’s success, that has steadily declined so that Ukip is going into the 2017 general election on 4 per cent, according to the latest polls. If the polls can be trusted, that’s a serious collapse.

Can Ukip get anymore MPs?

In the 2015 general election Ukip contested nearly every seat and got 13 per cent of the vote, making it the third biggest party (although is only returned one MP). Now Ukip is reportedly struggling to find candidates and could stand in as few as 100 seats. Ukip leader Paul Nuttall will stand in Boston and Skegness, but both ex-leader Nigel Farage and donor Arron Banks have ruled themselves out of running this time.

How many members does Ukip have?

Ukip’s membership declined from 45,994 at the 2015 general election to 39,000 in 2016. That’s a worrying sign for any political party, which relies on grassroots memberships to put in the campaigning legwork.

What does Ukip's decline mean for Labour and the Conservatives? 

The rise of Ukip took votes from both the Conservatives and Labour, with a nationalist message that appealed to disaffected voters from both right and left. But the decline of Ukip only seems to be helping the Conservatives. Stephen Bush has written about how in Wales voting Ukip seems to have been a gateway drug for traditional Labour voters who are now backing the mainstream right; so the voters Ukip took from the Conservatives are reverting to the Conservatives, and the ones they took from Labour are transferring to the Conservatives too.

Ukip might be finished as an electoral force, but its influence on the rest of British politics will be felt for many years yet. 

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