UK economic system continues restoration in July
The UK economic system grew by 6.6% in July, in line with official figures, however stays far under pre-pandemic ranges.
It’s the third month in a row that the economic system has expanded.
However the Workplace for Nationwide Statistics (ONS) stated that the UK “has nonetheless solely recovered simply over half of the misplaced output attributable to the coronavirus”.
Hairdressers, pubs and eating places contributed to development after firms have been allowed to reopen in July.
Is the UK economic system again to pre-coronavirus ranges?
Undoubtedly not. The UK’s economic system – which is measured by the worth and the quantity of products and providers it produces – remains to be 11.7% smaller than it was in February, earlier than lockdown was imposed.
Development in July was additionally slower than the 8.7% enlargement seen in June.
There are encouraging indicators, nevertheless. Thomas Pugh, UK economist at Capital Economics, stated the reopening of eating places and pubs meant the lodging and meals providers sector “rose by a whopping 140.8%” between June and July.
This had a knock-on impact for the alcohol business which grew by 32.7%.
Maintaining kids occupied whereas at house additionally continued to spice up demand for toys and video games, stated the ONS, whereas holidaying within the UK supported campsites, cottages and caravan parks “due to a big improve in staycations”.
Nonetheless, exercise within the lodging and meals providers sector was nonetheless 60.1% under the extent recorded in February.
And whereas Mr Pugh expects the Eat Out to Assist Out scheme to supply an extra increase in August, “now that the majority sectors within the economic system are open once more there may be little scope for additional giant rises in month-to-month GDP”.
In the meantime, the automobile sector noticed demand return to pre-pandemic ranges.
“Automotive gross sales exceeded pre-crisis ranges for the primary time with showrooms having a very busy time,” stated Darren Morgan, director of financial statistics on the ONS.
Up, up, however not away. The UK economic system continued a pointy restoration from lockdown in July, rising by a bumper 6.6% within the month. However the fee of restoration was slightly slower than in June, elevating some issues in regards to the ongoing energy of the bounce again.
The economic system remains to be almost 12% smaller than earlier than the pandemic disaster, and has recovered simply over half of the misplaced output through the shutdowns.
Whereas the third quarter is on the right track to see a report quantity for development and the official finish of recession, fears stay that the restoration may peter out.
Enterprise teams proceed to push for extensions to authorities assist packages which might be attributable to shut. The figures in July mirrored the partial reopening of retail, manufacturing, and a few public sector actions corresponding to colleges.
How lengthy will restoration take?
Forecasts differ however the consensus is it will not be swift.
The UK fell into recession after exercise shrank for the primary and second quarters of this yr after the federal government introduced a lockdown to cease the unfold of the coronavirus.
And within the three months to July, the economic system shrank by 7.6%.
Mr Pugh questioned how robust the UK’s restoration can be all through the remainder of the yr.
“Discuss of tax rises on the subsequent Funds, an extra deterioration within the Brexit negotiations and a worrying rise within the variety of virus circumstances and tighter social distancing restrictions will all conspire to gradual the restoration even additional,” he stated.
Dean Turner, economist at UBS International Wealth Administration, predicts that it’ll take till the top of 2021 earlier than the UK recovers to pre-pandemic ranges.
“Even with a managed exit from the Brexit transition settlement, it’s unlikely that the misplaced output can be recovered earlier than the top of subsequent yr,” he stated.
“The newest twist in negotiations raises the prospect that any restoration could take longer.”
What dangers lie forward?
The variety of coronavirus circumstances within the UK have begun rising once more and social gatherings of greater than six individuals can be unlawful in England from Monday.
“The restoration possible will stall if, as appears possible, new Covid-19 infections proceed to rise, retaining individuals working from house and avoiding consuming providers that require shut human contact,” stated Samuel Tombs chief UK economist, Pantheon Macroeconomics.
“Accordingly, we proceed to anticipate GDP to be about 5% under its peak on the finish of this yr.”
In the meantime, the Coronavirus Job Retention Scheme is because of finish on 31 October.
Chancellor Rishi Sunak has been emphatic that it’ll not proceed. Nonetheless, the Decision Basis suppose tank stated he “must rethink his plans to swiftly section out assist on condition that the financial disaster can be with us for a while to come back”.
Former prime minister and chancellor Gordon Brown, warned that ending the furlough scheme was a “cliff-edge” that would set off “a tsunami of unemployment”.
“The federal government’s acquired to alter course right here,” he informed the BBC’s Right this moment programme.