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UK economic recovery ground to halt in October as coronavirus case numbers rose

GDP remains 7.9 per cent below pre-pandemic level after record plunge during first lockdown

Ben Chapman
Thursday 10 December 2020 13:38 GMT
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UK economy not expected to return to pre-pandemic levels until end of 2022

The UK economic recovery almost ground to a halt in October as output grew 0.4 per cent, official figures show.

With cases rising and restrictions enforced across Wales, Northern Ireland, parts of England and Scotland, gross domestic product (GDP) remained 7.9 per cent below its pre-pandemic peak by the end of the month. 

Survey data indicated a further slowdown in November as coronavirus case numbers rose and England entered a national lockdown. Almost half of businesses said sales were below the level expected for the time of year, the Office for National Statistics reported.

Construction grew 1 per cent in October but remains 6.4 per cent below February’s level. The production sector, which includes manufacturing, is 4.4 per cent down on February’s level and services are down 8.6 per cent.

The biggest drag on growth was from accommodation and food services as tightening restrictions hurt trade.

Jonathan Athow, deputy national statistician at the ONS, said: "The UK economy has now grown for six months running but still remains around 8 per cent below its pre-pandemic peak.

"Public services output increased, while car manufacturing continued to recover and retail again grew strongly.

"However, the reintroduction of some restrictions saw services growth hit, with large falls in hospitality, meaning the economy overall grew only modestly."

There were some tentative signs of growth in the initial few days after England’s lockdown ended. The proportion of British adults who went shopping for goods other than basic necessities rose by 5 percentage points to 18 per cent in the week to 6 December, while traffic was 7 percentage points higher on 7 December than a week earlier.

However, the UK experienced a bigger economic hit than other wealthy nations and its recovery has been slower, giving the chancellor a difficult task as he tries to steer the country back to sustainable growth.

Responding to the figures, Rishi Sunak said: "I know people are worried about the winter months, but we will continue to support people through our Plan For Jobs to ensure nobody is left without hope or opportunity."

Experts are forecasting that the economy will go into reverse in November as a result of tougher restrictions and fears about rising Covid-19 case numbers and deaths.

Britain’s biggest business group, the Confederation of British Industry, said a fifth year of low investment against a backdrop of uncertainty around Brexit would hamper the recovery. The CBI forecasts output will not bounce back fully until the end of 2022.

Boris Johnson failed to reach an agreement with EU negotiators in Brussels on Wednesday, with fishing rights remaining one of the contentious areas yet to be resolved.

“Today’s ONS data show that the fourth quarter got off to a ponderous start even before the second lockdown in England was imposed," said Rory Macqueen, principal economist at the National Institute for Economic and Social Research.

"Survey data suggest that, although the economic impact of the second lockdown in November was smaller than the first, it does seem more likely than not that the final quarter of the year will show little or no overall growth in GDP with the recovery shuddering to a halt. 

"While the rollout of the vaccine offers some positive momentum, the final act of Brexit is likely to offset that in the early months of 2021.”

TUC General Secretary Frances O’Grady said: “The government has the power to drive a faster recovery, but the chancellor is asleep at the wheel.

“The spending review was his chance to step on the gas. But we are still waiting for a big investment push to support new jobs in green industry. And lots of communities are desperate for investment to recruit missing key workers in health, social care and other public services.”

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