Shape of the recession and recovery

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With the latest growth figures for the UK signalling growth we are finally starting to see a scenario whereby a more robust recovery takes place in the UK. But we still have a long way to go and, after largely flat growth 2011 and 2012, the UK economy remains 2.5% below the pre-recession peak.

The UK economy has recovered more slowly than most key competitors

When we look at the UKs recession and recovery compared to some of our key competitor nations we don't fare too well, as seen on the chart below. Compared with Canada, France, Germany, Ireland and the US, the UK economy had one of the deepest recessions from peak to trough, roughly equal to the depth of the German recession. The main exception is Ireland, who sustained a much more protracted recessionary phase.

The UK had a deep recession …GDP index, pre-recession peak = 100Source: OECD

When combined with the speed of recession, shown on the chart below, the UK had one of the slowest recoveries in the 3 years after reaching the depth of recession. This has left the UK lagging in terms of the size of the economy relative to pre-recession peak, with Canada, the US and Germany all now being larger than they were in 2007/2008.

…and a slow recoveryGDP index, recession trough = 100Source: OECD

The manufacturing recession and recovery paints a slightly different picture

Not much attention has been focused on how different industries fared during the recession and a look at the manufacturing sector yields some interesting and somewhat different results. Unlike the economy-wide recovery, none of these countries have fully recovered their manufacturing production levels. Ireland has come the closest, almost reaching its peak in 2011q4 and 2012q2 while French manufacturing has had the most difficult recovery and remains 17% below its pre-recession peak.

It also turns out that UK manufacturing did not sustain as fast or as deep a recession as any of these other countries. The peak to trough fall in manufacturing production sustained during the UK recession was 13%, much lower than the 20%, 21% and 23% see in the US, France and Germany respectively.

The UK manufacturing recession was not as deep...Index of manufacturing output, pre-recession peak = 100Source: OECD

Despite the less dramatic recession, the recovery of manufacturing output in the UK has remained among the slowest, equalling that of France. Germany, which had the deepest fall in manufacturing output during the recession, also had the strongest rebound and recovered 80% of the ground lost in 2 years.

…but recovery remains among the slowestIndex of manufacturing output, recession trough = 100Source:OECDWhen we think about the nature of the recession and recovery, it is clear that the UK has been plagued by a slow recovery, slower than many of our key competitors. Recent data has been strong and we need this to be the case if we are to see UK industry make up the ground lost during the recession.


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