UK is only G7 country with smaller economy than before Covid-19

theguardian.com:

A weaker than expected recovery from the coronavirus pandemic has left the UK as the only G7 country with a smaller economy than in early 2020, according to official figures likely to further undermine the government’s tax-cutting measures.

Before the prime minister and chancellor’s meeting with the head of the government’s independent forecaster on Friday morning, the Office for National Statistics (ONS) released figures showing that rather than the economy being 0.6% larger than in February 2020, a combination of a deeper recession during the pandemic and a weak recovery had left it 0.2% smaller.

A better than expected performance in the second quarter of this year, overturning a previous estimate of a 0.1% fall to a 0.2% increase and reversing an assessment that the UK was in recession by June, was not enough to boost GDP growth sufficiently to recover from the first lockdowns in 2020 that brought large parts of the economy to a standstill.

Analysts said Richard Hughes, the head of the Treasury’s independent forecaster, the Office for Budget Responsibility, would be forced by the new figures to take a tough stance on assessing the impact of further borrowing on the public finances.

All the other major economies in the G7, including France and Germany, recovered strongly enough to be larger than they were in February 2020.

“Despite the better news on the performance of the economy in the second quarter, the overall picture is that the economy is in worse shape than we previously thought,” Paul Dales, an economist at Capital Economics, said.

“And that’s before the full drag from the surge in inflation and leap in borrowing costs have been felt.”

The Bank of England said earlier this month that it understood the UK economy was