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Long-term profile of Gross Domestic Product (GDP) in the UK

GDP has grown by a compounded rate of 2.6% a year since 1948

Gross domestic product (GDP) is a measure of economic activity which captures the value of goods and services that the UK produces during a given period. GDP statistics are generally presented in real terms (also known as chained volume or constant prices) as they are adjusted to account for changes in the price level.

Real GDP growth is usually associated with higher living standards. Among other factors, an increase in the production of goods and services allows incomes to rise, supporting a higher level of consumption and therefore well-being.

Real GDP growth since 1948

Real GDP has grown considerably since the end of the Second World War. The quantity of goods and services produced in the economy is now approximately four times larger than in 1948, the first year for which comparable statistics are available. This can be attributed to a range of factors, including: population growth which increases the amount of available labour; investment in capital which improves labour productivity; and technological improvement which increases how much the economy can produce (productive potential).

Figure 1: Real GDP

Figure 1: Real GDP
Source: Office for National Statistics

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The compounded annual rate of real GDP growth since the 1948 has been 2.6%. This means that if the economy grew at a constant 2.6% every year since 1948 it would be at the same level as it is now. Despite this considerable improvement, there have been periods when annual growth in output has fallen. These contractions have varied in length and magnitude; the largest and most notable started in 2008.

The highest annual rate of growth was 7.4% in 1973, while the sharpest downturn in a single year was -5.2% in 2009.

Figure 2: Real annual GDP growth

Figure 2: Real annual GDP growth
Source: Office for National Statistics

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Length and magnitude of GDP contractions

Between 1948 and 1973, GDP increased consistently on an annual basis. On a quarterly basis, there were a number of contractions. However, these were generally isolated and did not result in annual downturns in output in these years.

Since 1973, there has been one instance of contracting annual output in every decade. These occurred in 1974/75, 1980/81, 1991 and 2008/09. By analysing these contractions on a quarterly basis, we can see that they varied considerably in length and magnitude.

Figure 3 shows how much GDP fell compared to the period before the downturn began; this is presented in an index form so that growth in different decades can be compared. For example, a fall in the index from 100 to 97 represents a 3% fall.

The 2008/09 economic downturn is the most severe economic downturn of the four: GDP fell by 7.2% over the five quarters between Q1 2008 and Q2 2009. Previous contractions in UK GDP have been less pronounced. Output fell by 1.6% over two quarters in the 1970s, 4.6% over five quarters in the 1980s, and 2.4% over five quarters in the early 1990s.  

The time taken to recover the lost output is also markedly different when you compare the 2008/9 downturn with the 1970s, 1980s and 1990s downturns. These earlier downturns all took between 10 and 13 quarters to recover the output lost. By contrast, the output lost during the 2008/09 economic downturn remains 3.2% below its previous peak, 22 quarters after Q1 2008.

Figure 3: Real GDP - seasonally adjusted

Figure 3: Real GDP - seasonally adjusted
Source: Office for National Statistics

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In summary, the level of GDP has roughly quadrupled since 1948. There has been one downturn in annual output in every decade since the 1970s, the most pronounced of which is the current economic downturn which started in 2008.

Categories: Economy, National Accounts, Prices, Output and Productivity
Content from the Office for National Statistics.
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