UK economic system grew lower than anticipated in August, as restoration from the coronavirus pandemic slows
The White Lion pub seen at the Covent Garden. UK Covid-19 cases are now doubling every seven to eight days, Prime Minister Boris Johnson is considering national restrictions for a short period to “short-circuit” the virus.
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LONDON – The U.K. economy grew 2.1% in August on a monthly basis, as the country’s gradual recovery from the coronavirus crisis continued, albeit at a slightly slower pace.
August’s estimated growth in GDP (gross domestic product) was lower than expectations, with economists polled by Reuters expecting a monthly expansion of 4.6%. It follows an expansion of 6.4% in July, 9.1% in June and 2.7% in May, following a record 19.5% plunge in April, according to the Office for National Statistics.
Friday’s data from the Office for National Statistics showed that August GDP remained 9.2% lower than in February, before the full impact of the pandemic was felt.
GDP grew 8% in the three months to August as lockdown measures began to ease, according to the ONS.
The U.K.’s dominant services sector grew by 2.4% in August, following growth of 5.9% in July. It was boosted in large part by almost 70% growth in the food and beverage services industry, which the ONS attributed to easing of restrictions and the government’s “Eat Out to Help Out” scheme.
The country’s emergence from lockdown in recent months has paved the way for a recovery in many sectors of the economy, but cases of Covid-19 have been growing exponentially in recent weeks as a second surge appears to be underway.
The British government has imposed a 10 p.m. curfew for bars and restaurants across the U.K., with further restrictions expected in the coming weeks.
As of Friday morning, the U.K. has confirmed 564,502 cases and 42,682 deaths, according to data compiled by Johns Hopkins University.
On September 24, U.K. Finance Minister Rishi Sunak announced a new emergency package of measures to contain unemployment, replacing the country’s furlough scheme which is due to expire this month.
‘A long, difficult winter’
“With recent surveys pointing to activity softening in September, and the potential for further and more stringent localized restrictions on activity, doubt is growing as to whether the recovery can be sustained into the final quarter of the year,” UBS Wealth Management Economist Dean Turner said Friday.
“Sluggish progress is likely to encourage the Bank of England to increase its bond buying program (QE) at its November meeting.”
Since the onset of the pandemic, the central bank has cut its main lending rate twice from 0.75% to 0.1% and deployed a £745 billion ($964.6 billion) asset purchase program in a bid to shore up the economy.
“While there are positive indications from the Bank of England of growth returning to pre pandemic levels before Christmas, this is far from a done deal,” said Tom Stevenson, investment director for personal investing at Fidelity International.
“The furlough scheme comes to an end this month and there is a real danger that fear of unemployment triggers a negative feedback loop of precautionary saving and dampens consumer confidence.”
With the prospect of further localized lockdown measures being introduced Monday, Stevenson said the country was bracing itself for a “long, difficult winter.”