UK economy grows by record 15.5% but remains well below pre-pandemic level

GDP 8.2% down on a year ago as recovery peters out in September

Redundancies hit record high as hundreds of thousands lose jobs.mp4

The UK economy grew at a record pace in the third quarter of the year as the country emerged from lockdown, but remains more than 8 per cent smaller than it was before the pandemic.

Official figures show gross domestic product (GDP) grew 15.5 per cent between July and September – the biggest quarterly gain on record – after non-essential shops, pubs and bars reopened.

It followed a record 19.8 per cent plunge in Q2 and a 2.5 per cent drop in the first three months of the year,  the Office for National Statistics said. 

Between July and September economic output was 9.6 per cent lower than in the same quarter a year earlier. 

Concerningly, the recovery continued to slow in September, a month in which parts of England were under local restrictions as case numbers rose. The UK’s economic output grew just 1.1 per cent in the month compared to 6.7 per cent in July and 2.2 per cent in August when the government’s Eat Out to Help Out scheme subsidised people’s meals in restaurants.  

The economy remained 8.2 per cent smaller in September than it was in February, the latest monthly figures indicate. Monthly data is more volatile than quarterly data, and so is more likely to be revised later on. 

Grim economic figures come alongside news that the death toll from Covid-19 surpassed 50,000 on Wednesday.

As England goes through a second national lockdown this month, Scotland and Northern Ireland enforce tough restrictions and Wales emerges from a "fire-break", gross domestic product is expected to fall further.

On Monday, motor traffic was 24 percentage points below its level before the pandemic while the number of people visiting UK shops was only a third of the level recorded a year ago.

Jonathan Athow, deputy national statistician at the Office for National Statistics (ONS), said: "While all main sectors of the economy continued to recover, the rate of growth slowed again with the economy still remaining well below its pre-pandemic peak.

"The return of children to school boosted activity in the education sector.

"Housebuilding also continued to recover while business strengthened for lawyers and accountants after a poor August.

"However, pubs and restaurants saw less business after the 'Eat Out to Help Out' scheme ended, and accommodation saw less business after a successful summer."

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Last week, the Bank of England announced it would create another £150bn to boost the economy. The Bank forecasts GDP will shrink by a further 2 per cent this year, putting the UK on track for one of the worst economic performances of any wealthy nation this year.

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If the bank is correct, the UK economy will be 11 per cent smaller at the end of 2020 than it was at the start. By contrast, the US is on course to have shrunk by around 3.5 per cent. Germany’s Council of Economic Advisers said on Thursday that it expects German GDP to fall 5.1 per this year.

Some analysts have highlighted that part of the gulf may be explained by inconsistencies with how GDP is measured by different countries. The ONS attempts to put a value on public sector output such as education and health, which saw a significant dropoff in activity as non-essential procedures were cancelled and schools were closed. 

Some countries measure the output of these services primarily by the level of wages paid to workers in them which have not fallen during the pandemic.

Of greater concern to the government is that, while UK consumers have increased their spending close to levels seen before the pandemic, business investment has plunged, indicating that the government has failed to provide reassurance about the future economic situation.

Chancellor Rishi Sunak acknowledged that the recovery had slowed down in autumn. “The steps we've had to take since to halt the spread of the virus mean growth has likely slowed further since then,” he said.

"But there are reasons to be cautiously optimistic on the health side – including promising news on tests and vaccines.

"There are still hard times ahead, but we will continue to support people through this and ensure nobody is left without hope or opportunity."

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