ICAEW chart of the week: Olympinflation

Our chart this week shows how the Summer Olympics has grown from 43 medal events and 241 competitors in Athens in 1896 to 339 medal events attracting 11,326 competitors in the Tokyo Summer Olympics this year.

Olympinflation chart comprising columnsfor number of medal events and a line for competitors:

Medal events: 43 in 1896 to 95 in 1904 to 102 in 1912 to 156 in 1920 to 109 in 1928 to 129 in 1936 to 149 in 1852 to 150 in 1960 to 172 in 1968 to 198 in 1976 to 231 in 1984 to 257 in 1992 to 271 in 1996 to 300 in 200 to 302 in 2008 to 306 in 2016 to 339 in 2021.

Competitors from 241 in 1896 up to 3,089 in 1924 down to 1,332 in 1932 up to 3,936 in 1936 up to 4,955 in 1952 down to 3,314 in 1956 up to 7,134 in 1972 down to 5,179 in 1980 up to 10,651 in 2000 down to 10,625 in 2004 up to 10,942 in 2008 down to 10,768 in 2012 up to 11,326 in 2021.

Our chart this week shows how the Summer Olympics has grown from 43 medal events and 241 competitors in Athens in 1896 to 339 medal events attracting 11,326 competitors in the Tokyo Summer Olympics this year.

The arrival of the Summer Olympics has turned many of us into experts in obscure sports that never normally crossed our minds, as well as thrilling us with seeing the world’s top athletes compete to be the best in the sports we love. The sheer scale of sporting activity is immense as it turns a global audience into athletic couch potatoes over a period of two weeks every four years – or five on this particular occasion with the delay to 2021 because of the pandemic. Despite the absence of spectators, so far the Games have been gripping as tiny margins have determined who gets gold, silver or bronze or who comes home without a medal, but still the privilege of being an Olympian.

Our chart this week illustrates how the Summer Olympics has grown in scale over time. The Tokyo Summer Olympic Games continued the upward path in the number of medal events, with 339 medal events in 50 sporting disciplines from 33 sports and 11,326 competitors from 206 nations. This compares with 43 medal events in 10 disciplines from 9 sports in the first Summer Olympiad in 1896, involving just 241 competitors from 14 nations.

New sports this year include karate, skateboarding, sports climbing, surfing and (the return of) baseball/softball, providing new opportunities for competitors to show their talents to the world, and for the rest of us to add to our fleeting knowledge of what it takes to ride a skateboard in an organised format or the technicalities of riding a wave to score points. These add to the existing sports of aquatics, archery, athletics, badminton, basketball, boxing, canoeing, cycling, equestrian, fencing, field hockey, football, golf, gymnastics, handball, judo, modern pentathlon, rowing, rugby sevens, sailing, shooting, table tennis, taekwondo, tennis, triathlon, volleyball, weightlifting and wrestling.

The Olympics will be over all too soon, leaving us bereft and demanding more. Fortunately, the Paralympics will be starting on 24 August with 540 medal events in 22 sports to keep us glued to our screens this summer.

Chart of the week will be taking its customary break during August and will return in September, while the Summer Olympics will hopefully be taking a shorter than usual three-year break to return to schedule with the Paris 2024 Summer Olympics.

This chart was originally published by ICAEW.

ICAEW chart of the week: Tokyo Olympics cost update

Cost overruns have been a recurring feature of the modern Olympic movement, but the pandemic has blown the doors off the budget for the Tokyo games.

Tokyo Olympics cost update - column chart:

Budget v1 £5.2bn
Budget v2 £9.0bn
Budget v3 £9.0bn
Budget v4 £9.4bn (venues £4.7bn, Games £2.9bn, marketing and general £1.6bn)
Budget v5 £11.0bn (venues £5.4bn, Games £4.0bn, marketing and general £1.6bn) + Outside the Games costs £12.5bn = 
Estimate of £23.5bn (Organising Committee £4.7bn, Tokyo Metropolitan Government £10.2bn, Government of Japan £8.6bn)

Hosting an Olympics is a costly affair, with headlines about budget overruns a regular occurrence in recent decades. The Tokyo Olympics is no exception, with the latest official budget for the rescheduled 2020 Olympic Games rising to ¥1.7tn ($15.4bn or £11.0bn) compared with an original budget of $7.5bn or £5.2bn. 

Of course, nobody expected the original budget from Tokyo’s bid in 2013 to be the final result, but annual budgets since 2017 have shown a gradual rise in both the cost of running the Olympic Games and the cost of the venues. This would be unsurprising to those that remember the 2012 London Olympics, where the costs significantly exceeded the estimated overheads set out in the original bid.

The version two budget established in December 2017 of £9.0bn, comprising £4.7bn for venues, £2.4bn for running the Games and £1.9bn for marketing, communications and general expenditures was substantially maintained in version three with offsetting increases and decreases in different parts of the budget. Additional income allowed the organisers to add in a contingency to increase the budget to £9.2bn by 2019, with the budget for venues still £4.7bn, running the Games up to £2.9bn (including the contingency) and marketing and general expenditures down slightly to £1.6bn.

The pandemic drove a big jump in the version five of the budget, put together six months after the 2020 Games were supposed to have taken place. The budget for venues (permanent, temporary and energy costs) went up to £5.4bn, up from £4.7bn in previous budgets, while the version five budget for running the Games (transport, security, technology and operations) of £4.0bn is a third more than the 2019 estimate of £2.9bn and more than 60% higher than the 2017 estimate of £2.4bn, with marketing and general expenditures still at £1.6bn.

Not shown in the chart is the expected revenue that was anticipated to fund the Tokyo Organising Committee’s share of costs of £4.7bn, comprising £0.6bn from the International Olympic Committee (the IOC, which owns the global broadcasting rights), £2.8bn from sponsorship and licencing, £0.6bn from ticket sales and £0.7bn in other revenues. With tickets being refunded to spectators who can no longer attend, this leaves a hole in the Organising Committee’s finances that will need to be funded either by the IOC or by the Tokyo Metropolitan Government.

The chart also illustrates how the official budget for the Olympics is not the full story, with the Tokyo Metropolitan Government and the Japanese Government incurring a further £12.5bn or so in costs outside the Games, in addition to their already substantial contributions to the cost of venue construction. There are some disputes about these numbers as their spending include ‘legacy’ investments in public infrastructure that could be argued should not be counted, in addition to costs with a direct causal linkage, such as policing and security costs away from Olympic venues. The £12.5bn amount is based on AP reporting of a Japan Board of Audit report from 2019, but recent reports in the Japanese press have suggested the costs to the metropolitan and national governments of hosting the Olympics could end up being even larger.

While the pandemic was not foreseeable back in 2013 when Tokyo was awarded the 2020 Olympics, the budgetary tale highlights the importance of building in headroom for changes as well as considering contingencies when setting budgets. For example, there was insurance cover to deal with the risk of an event like the pandemic leading to a cancellation of the Games, but the insured amounts were insufficient to cover the full losses of a complete cancellation. This is no doubt one (but not the only) reason why the organisers are going ahead despite everything that has happened.

Fortunately for those of us who like watching sport on our screens, the Olympic Games and the Paralympic Games are going ahead after all and it is the performance of the athletes that will be our main focus for the next few weeks. We wish them the best of luck!

This chart was originally published by ICAEW.

ICAEW chart of the week: UK-EU financial settlement update

This week’s chart is on the UK-EU withdrawal agreement financial settlement. Perhaps surprisingly given recent press coverage, ICAEW’s analysis is that it remains roughly unchanged from the Treasury’s 2018 estimate.

Chart on UK-EU financial settlement.

HM Treasury estimate from 2018 of £39bn less £16bn transition = post-transition net payments of £23bn (£19bn approved expenditure not paid + £11bn pension obligations, less £7bn share of EU assets).

Changes since 2018: -£2bn approved expenditure not paid +£2bn pension obligations.

EU 2020 accounts £42bn less forecast UK receipts of £14bn less EIB and other of £bn = Post-transition net payments £23bn (£17bn approved expenditure not paid + £13bn pension obligations - £7bn share of EU assets).

The €47.5bn (£42bn) receivable from the UK included in the recently published EU 2020 accounts caused a kerfuffle last week, as excitement levels grew over what turns out to be a pretty much unchanged estimate for the post-transition element of the UK-EU financial settlement.

ICAEW’s chart of the week attempts to reconcile the £39bn estimate calculated by HM Treasury back in 2018 with the €47.5bn (£42bn) receivable recorded by the EU in its financial statements on 31 December 2020, the last day of the transition period. Perhaps surprisingly, given recent press coverage, ICAEW’s analysis is that the estimate for the post-transition element of the settlement of £23bn remains unchanged overall.

Much of the confusion arises because the £39bn estimate made by HM Treasury in 2018 was a net number, reflecting forecasts of gross payments to the EU by the UK government less anticipated payments by the EU and EU-related institutions back to the UK.

The chart starts by analysing the £39bn estimate into its four main component parts: Net transition payments of £16bn, the UK’s share of approved expenditure not yet paid of £19bn and pension contributions of £11bn less the UK’s share of EU assets of £7bn, with the last three elements amounting to a net £23bn amount to be settled in the post-transition period.

The transition element of £16bn is now in the past, reflecting membership dues for the then anticipated transition period of 1 April 2019 to 31 December 2020 less money coming back from the EU to the UK over the same period. In the end, this turned out to be a couple of extensions in the UK’s period of membership that resulted in a shorter transition period from 1 February to 31 December 2020 – a switch in classification for some of the £16bn from post-EU transition payments to pre-EU exit net membership cost.

The UK’s share of approved expenditure not yet paid of £19bn was also a net number, reflecting a gross amount payable to the EU for ongoing programmes at the end of 2020 less amounts coming back the other way. The OBR has been working to an estimate of €296bn for the balance of approved expenditure not paid (also known as reste á liquider or RAL), which compares with €294bn in the notes to the EU accounts once adjustments were applied to the overall total of €303bn that the EU was committed to spend as at 31 December 2020. 

The calculated receivable of €35bn or £31bn does not reflect an estimated £14bn of payments by the EU to UK participants in these programmes, for example to British universities and research institutions, giving rise to a net amount in the order of £17bn, a couple of billion below the original estimate.

This slightly smaller net outflow is offset by a larger pension liability in the EU accounts, driven by a lower discount rate than originally anticipated. The UK’s €14bn or £13bn share of the €116bn liability is therefore higher than the €12bn or £11bn share of a €96bn liability that was previously forecast. In practice, the value attributable to this balance will change over time given that payments are expected to continue to 2064 or later.

Another area where the EU accounts do not provide the complete story is in the UK’s share of assets it expects to receive back as part of the withdrawal agreement. The €2bn amount in the EU accounts primarily relates to the UK’s share of fines, but it excludes the return of UK shareholdings in EU-related institutions that are owned by member states outside of the scope of the EU consolidated financial statements. Of the £5bn in this category, €3.5bn or £3bn relates to the return of the UK’s share capital in the European Investment Bank.

Despite the numbers being pretty much as expected, there still remains some uncertainty concerning the £23bn post-transition estimate in relation to the calculation of the amounts coming back to the UK, and HM Treasury and the OBR will no doubt continue to refine these estimates over the next few months and years.

The financial settlement is not the end of the UK’s financial engagement with the EU as the government has agreed to participate in a number of EU programmes from 1 January 2021 onwards, for example in Horizon pan-European scientific research, as well as working with the EU on international development programmes funded from the aid budget.

This chart was originally published by ICAEW.

ICAEW chart of the week: OBR climate change scenarios

Our chart this week is on the OBR Fiscal Risks Report, highlighting how delaying action to achieve net zero could double the cost to the public finances compared with acting more quickly.

Chart show public debt change in 2150-51 as % of GDP for different scenarios: Investment switch and motoring tax -12%, early action high productivity +10%, early action scenario +21%, early action low productivity +32%, late action scenario +43%, unmitigated climate change +38%. The final column for unmitigated climate change also has the public debt change in 2100-01% of +161%.

With two ‘once in a century’ events in less than two decades adding more than £1tn to public debt, it is unsurprising that the OBR’s Fiscal Risks Report published earlier this week places much more emphasis than previous reports on the potential for catastrophic risks, whether that be from further pandemics, major wars, climate change or cyberattacks.

The report focuses on three particular risks: the coronavirus pandemic, the cost of debt, and climate change, with the latter being the subject of the #icaewchartoftheweek. 

The OBR distinguishes fiscal risks from climate change between those stemming from global warming itself (physical risks) and those relating to the move to a low-carbon economy, including the policies to achieve that (transition risks). In unmitigated climate change scenarios, the physical risks dominate, whereas the more that is done to mitigate global warming by reducing emissions, the more important transition risks become. 

The chart illustrates two main scenarios explored by the OBR – an early action scenario where the UK and other governments around the world push forward with plans to achieve net zero by 2050 and a late action scenario where the UK government delays taking actions to decarbonise the economy. The chart also shows three variants on the early action scenario depending on whether decarbonisation boosts or damages productivity or where investment is switched from other areas and motoring taxes retained. 

In the early action scenario, the OBR estimate that public sector debt would rise by 21% of GDP by 2050-51 (equivalent to £469bn in current prices) as a consequence of lost fuel duties and other taxes of 19%, additional spending of 6%, indirect economic effects of 6% and interest on borrowing of 4% less 14% from carbon taxes imposed to incentivise the shift to net zero. 

The high productivity variant is similar in terms of costs and carbon tax receipts, but with indirect economic effects contributing additional tax receipts with a consequent reduction in borrowing costs over 30 years, resulting in net additional debt of 10% of GDP. The low productivity variant assumes the reverse with lower tax receipts and a smaller economy combining to increase the net increase in public debt to 32% of GDP. The other variant identified by the OBR has the effect of reducing public debt, where investment in decarbonisation is funded by cutting other public investment plans and existing motoring taxes are shifted onto electric cars to retain that source of income to the exchequer.

A key finding in the report is that delaying action would cost a lot more than moving early with public sector debt rising by 43% in 2050-51, more than double the early action scenario, as it would require a more radical intervention costing more and resulting in more adverse economic effects.

Ironically, the OBR estimates that doing nothing would have a smaller impact on net debt by 2050-51 than the late action scenario as decarbonisation costs would not be incurred. However, the OBR estimates that unmitigated climate change would have a significant impact for the rest of the century, with public debt potentially rising to 289% of GDP by 2100-01 if action is not taken to prevent temperatures rising around the world.

For more information read the OBR Fiscal Risks Report.

This chart was originally published by ICAEW.

ICAEW chart of the week: UK population of 67.1m

This week’s chart covers the pre-census population estimate of 67.1m for June 2020 just released by the Office for National Statistics. Do more deaths, fewer births and returning migrants mean the 2021 number will be smaller?

Map of UK with nations and regions in different shades and labels with populations: Scotland 5.5m, North East 2.7m, Yorkshire and the Humber 5.5m, East Midlands 4.8m, East of England 6.3m, London 9.0m, South East 9.2m, South West 5.7m, West Midlands Region 5.9m, Wales 3.2m, North West 7.4m, Northern Ireland 1.9m.

ICAEW’s chart of the week is based on the UK population estimate for June 2020 released by the Office for National Statistics (ONS) on 25 June 2021, which estimates that there were 67.1m people living in the UK last summer. This is the last estimate before the March 2021 census that should provide a more accurate count of the population – potentially leading to revisions to this and previous estimates over the last few years.

The population estimate comprises 56.5m people in England, 5.5m in Scotland, 3.2m in Wales and 1.9m in Northern Ireland. Within England there were 9.0m in London, 9.2m in the South East, 6.3m in the East of England, 4.8m in East Midlands, 5.5m in Yorkshire & the Humber, 2.7m in the North East, 7.4m in North West (including 2.8m in Greater Manchester), 5.9m in the West Midlands (including 2.9m in the West Midlands city-region), and 5.7m in the South West.

The median age for the population was 40.4 years old, with 19.8m aged between 0 and 24, 21.8m from 25 to 49, 19.7m from 50 to 74 and 5.8m aged 75 or more.

The ONS reports that the population increased by 284,000 or 0.43% from 2019 comprising a ‘natural’ increase of 32,000 (701,000 births less 669,000 deaths), net migration of 247,000 (immigration of 622,000 less emigration 375,000) and other movements of 5,000. This is a fall from the 361,000 increase seen in the previous year, primarily because of the coronavirus pandemic from mid-March 2020 to June 2020, when deaths increased and migration went into reverse.

The big question is whether the population may actually shrink when the 2021 census is reported, with deaths from the second and third waves of the pandemic, a further decline in the birth rate and a potential outflow of migrants combining to reduce the population for the first time since 1982.

This chart was originally published by ICAEW.

ICAEW chart of the week: Banknotes in circulation

Our chart illustrates how banknotes in circulation have grown during lockdown despite a decline in cash usage. Will the new £50 note launched on Wednesday cause a further rise?

Chart showing steady growth in banknotes in circulation from £26bn in 2001 to £69bn in 2017, followed by three flat years including £70bn in 2019, before a jump to £80bn in 2021. The latter comprised £18bn in £50 notes, £45bn in £20 notes, £15bn in £10 notes and £2bn in £5 notes.

At 28 February 2021, there were 357m paper £50 notes worth £18bn, 2,237m polymer and paper £20 notes worth £45bn, 1,540m polymer £10 notes worth £15bn and 407m polymer £5 notes worth £2bn – a total of £80bn in circulation. This excludes around £8bn in Scottish and Northern Irish banknotes and in the order of £5bn in coins.

With around 60m people in England and Wales (as Scotland and Northern Ireland have their own banknotes), this is equivalent to approximately six £50 notes, 37 £20 notes, 26 £10 notes and seven £5 notes per person. Of course, not all of these are in purses, wallets or stuck down the back of sofas – many live in cash drawers and safes at high street banks, retailers and other businesses, as well as a certain proportion that have migrated around the world.

There has been some speculation about the reasons for the jump in cash holdings during the pandemic, which appears counterintuitive given the significant decline in cash usage as contactless and online payments have become more popular. Part of this may be hoarding in the context of a national emergency, while others have speculated that criminal enterprises have struggled to launder cash at a time when many retail businesses have been closed. Another potential driver is the crossover between the old and new £20 notes, with the polymer £20 launched in February 2020 while the paper note it replaced is still in circulation. With the announcement that both £20 and £50 paper notes will be withdrawn in September 2022, there is likely to be a flood of cash coming back to the Bank of England next year.

The new Turing £50 note completes the changeover from paper to polymer, joining the Churchill £5, the Austen £10 and the Turner £20 polymer notes. The Adam Smith £20 note and the Boulton-Watt £50 note are the last paper notes still in circulation.

Speaking at Bletchley Park, where Turing carried out his famous codebreaking work, Bank of England Governor Andrew Bailey said: “Our banknotes celebrate some of our country’s most important historical figures. That’s why I am delighted that Alan Turing features on the new polymer £50 note. Having undertaken remarkable codebreaking work here at Bletchley Park during the Second World War, he went on to pioneer work on early computers, as well as making some ground-breaking discoveries in the field of developmental biology. He was also gay and was treated appallingly as a result. Placing him on this new banknote is a recognition of his contributions to our society, and a celebration of his remarkable life.”

More information on banknotes is available from the Bank of England.

This article was originally published by ICAEW.

ICAEW chart of the week: Rail journeys

This week’s chart tracks railway usage, illustrating how passenger journeys in Great Britain dropped by 77.7% from 1,739m trips in 2019-20 to 388m in the year to 31 March 2021.

Bubble chart showing railway passenger journeys. 1872: 407m - 1920: 2,186m - 1982: 630m - 2019-20: 1,739m - 2020-21: 388m.

The current number of journeys is the lowest since records began in 1872, when 407m trips were taken at the start of the heyday of rail. Passenger numbers grew until 1920 and a peak of 2,186m journeys, before the advent of the motor car saw trips decline gradually over the following 60 or so years until the nadir of 630m journeys in 1982. Since then, passenger journeys have grown rapidly up to 2016-17 (1,727m journeys) before levelling off, followed by the huge decline in the most recent financial year.

Passenger numbers have started to rise again in the last few months but the big question is whether they will return to their pre-pandemic level or if there will be a permanent decline, with fewer commuters as working patterns change and fewer business and shopping trips as online retail takes over?

The cost of running empty trains has been significant for the now ‘nationalised’ railway, with train operators converted from franchise businesses into management-contract concessions alongside the already publicly owned rail infrastructure owner Network Rail. Emergency payments to train operators in 2020-21 amounted to just over £7bn, adding to the cost of an already taxpayer-subsidised railway system in Great Britain.

The difficulty for the new Great British Railways organisation that will take charge of the railways over the next couple of years will be in finding ways to bring passengers back so that neither subsidies nor prices have to go up permanently.

This chart was originally published by ICAEW.

ICAEW chart of the week: Household savings

Will there be a rush to spend the £7,000 in household net cash savings built up over the course of the pandemic?

Bar chart showing per household net cash savings by month. Apr 2019: -£25, £45, £0; Jul 2019: -£25, £105, £100; Oct 2019: £5, £55, -£65; Jan 2020: -£55, £35, £555; Apr 2020: £1,020, £1,235, £640; Jul 2020: £455, £465, £295; Oct 2020: £315, £275, £475; Jan 2021: £460, £370, £165; Apr 2021: £280.

The #icaewchartoftheweek is on household savings built up over the course of the pandemic, illustrating how households have saved an average of £7,000 over the last fourteen months. A big question for the economic recovery is whether households will splash the cash once restrictions are lifted, providing a consumer-led boost to the economic recovery?

According to Bank of England statistics released on 2 June 2021, since the start of the pandemic in March 2020 up to April 2021 households have saved or repaid debts in the order of £195bn or an average of £14bn a month. This compares with £4.8bn or £0.4bn a month in the 11 months to February 2020, when cash savings were mostly offset by borrowing on consumer credit or mortgages.

With approximately 27.8m households in the UK according to the Office for National Statistics, this means that families have saved an average of just over £7,000 or £500 per month since the first lockdown in March 2020, compared with approximately £175 or £15 a month in the eleven months prior to the pandemic.

This reflects many lost opportunities for spending, with fewer holidays and nights out possible because of lockdown restrictions. Uncertainty about future economic prospects is likely to have also played a part, with many individuals cutting back on discretionary spending ‘just in case’.

Of course, there is no such thing as an average household. More prosperous families will have saved up a lot more than the £7,000 average and so are likely to have the capacity to spend a lot more if they want to, while many individuals will have run down savings or borrowed to survive through a difficult period.

For those fortunate families who are in a better financial situation, the big economic question is whether they will take the money they have saved from not going on holiday or going out over the course of the last year and put it into their pensions or other forms of investment – or will they choose to splurge on enjoying themselves once restrictions are fully lifted?

The (almost) £200bn question.

This chart was originally published by ICAEW.

Source detail

Source data from Bank of England, Money and Credit – April 2021 (published 2 June 2021) divided by an estimated 27.8m households in the UK per the Office for National Statistics.

Household net cash savings = Seasonally adjusted changes in household M4 bank and building deposits plus changes in National Savings & Investments holdings (together ‘cash savings’), less seasonally adjusted changes in consumer credit and less seasonally adjusted changes in mortgage debt.

Total for 11 months to Feb 2020: cash savings £62.6bn less increases in consumer credit £11.5bn less increase in mortgage debt £46.3bn = £4.8bn or £175 per household.

Total for 14 months to April 2021: cash savings £235.2bn plus net repayments of consumer credit £23.1bn less increase in mortgage debt £63.5bn = £194.8bn or £7,005 per household.

ICAEW chart of the week: UK inflation

This week’s chart takes a look at UK inflation following news that the annual rate of inflation more than doubled in April to 1.5%, more than twice the 0.7% reported for the previous month.

Chart: CPI increasing from less than 0.5% in Apr 2016 to over 3% in Oct 2017 before falling to close to zero in Oct 2020, zigzagging to 0.7% in Mar 2021 and then jumping to 1.5% in Apr 2021. 

Compared with five year annualised rate gradually increasing from 1.5% in 2016 to close to just under 2% now.

The headline rate of inflation doubled this week from 0.7% to 1.5%, giving rise to concerns about the economic recovery. Economists aren’t getting worried just yet, but are they right to be so sanguine? 

This scale of this jump partly reflects the timing of the first and current lockdowns, as inflation is typically measured by comparing prices with the same month a year previously, with significant changes both this year as the UK started to emerge from its third lockdown and a year ago as it was entering its first. Some commentators have pointed out that the temporary cut in VAT on restaurant food and leisure activities help prevent the jump from being even higher.

Our chart compares the annual rate of Consumer Price Index (CPI) inflation with a more stable measure, which is the annualised rate of CPI inflation over a five-year period. This is less susceptible to short-term swings in the economy, but as the chart shows, medium-term inflation has been gradually rising over the past five years even as headline rates on an annual basis fell over the last four years before the pandemic.

This perhaps explains some of the relaxed responses from economists about the sudden burst in inflation in the last month, given the annual rate of increase still remains below the medium-term trend, despite the current extraordinary economic circumstances.

Of course, that is not to say that inflation might not become a problem as the UK emerges further from lockdown. Many businesses have closed over the last year, particularly in the retail sector, while those that have survived will be looking to repair their balance sheets – a recipe for higher prices as constrained supply meets higher post-lockdown demand from consumers. Only time will tell whether this will feed into sustained higher levels of inflation or will jump be a temporary adjustment that falls out of the headline rate again in a year or so’s time.

ICAEW chart of the week: UK monthly GDP

This week’s chart takes a look at the rebound in UK gross domestic product in March 2021, despite the country remaining in lockdown.

Chart showing GDP between Mar 2019 and April 2021: from approximately £195bn a month for the first year, before dipping to just over £145bn in April 2020 and then recovering to around £185bn, then falling to just under £180bn and return to almost £185bn in April 2021 with a monthly increase of +2.1%.

UK GDP jumped 2.1% in March 2021 according to the Office for National Statistics. A positive sign but, as our chart of the week illustrates, there is still a long way to go to get back to pre-pandemic levels of economic activity. 

The #icaewchartoftheweek is on the economy this week, taking a look at how the latest economic statistics from the Office for National Statistics indicate a rebound in GDP in March 2021 even as the country remained in lockdown. This is a positive sign as the UK starts to emerge from the pandemic and people start to return to ‘normality’, albeit a new normal that is likely to be different to what came before.

However, the chart also makes clear how far the UK still has to go to return to pre-pandemic levels of economic activity, with the anticipated square-root shaped recovery stopped in its tracks in the last quarter of 2020 as COVID-19 resurged and restrictions on daily life were reimposed. The 2.1% real-terms growth in GDP in March follows a pattern of ups and downs in recent months with a fall of 2.2% in November, an increase of 1.0% in December, a fall of 2.5% in January, and an increase of 0.7% in February.

With the progress made in combating the virus over the last few months enabling lockdown restrictions to be progressively lifted across the UK, the hope is that March will be the second month on a more sustainable upward curve.

This chart was originally published by ICAEW.