UK economic growth in August disappoints at 2.1%
The GDP figure for the month is also 9.2% below the pre-pandemic February level, according to the Office for National Statistics (ONS).
However, it is 21.7% higher than April’s record fall of 19.5% before the full impact of the coronavirus crisis. And overall, GDP grew 8% in the three months to August.
The ONS noted that the accommodation and food sectors contributed 1.25 percentage points towards August’s growth figure, as lockdown restrictions eased, the government’s Eat Out to Help Out scheme launched and Brits took staycations over the summer.
The food and services industry grew 69.7% as a result while the accommodation sector saw a 76% upswing.
Construction grew 3% following a record fall of 41.2% in April 2020, services were up 2.4% while production grew 0.3% and manufacturing by 0.7%.
‘Recovery could be reversed’
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: ‘’The UK’s economic rebound since the end of lockdown has faltered, with momentum slowing sharply in August, crushing hopes for a sustained recovery from the coronavirus crisis.
“This trend does not bode well for the coming months, given that fresh restrictions have been imposed across the hospitality industry, with venues forced to close at 10pm and local lockdowns being rolled out, suggesting the sector will not act as a prop for the wider economy. Other government data on the social impacts of the coronavirus showed that levels of socialising, eating out and travel have begun to fall after increasing during the summer.”
Streeter added that as the furlough scheme unwinds, mass redundancies are expected.
“That could have a downward spiralling effect on consumer demand as worries also ramp up about the risks of a no-deal Brexit and the effect that could have on the depressed economy,” she said.
Ruth Gregory senior UK economist at Capital Economics said with the new restrictions being imposed, it forecasts GDP to stand at 2% in September, followed by no increase at all in the last three months of the year.
“The big risk now is more restrictions and a no deal Brexit send the recovery into reverse,” she said.
Gregory added: “With the government’s fiscal support unwinding, the next few months will almost certainly be worse. We expect the new Covid-19 restrictions to mean that the economy does little more than move sideways in the final three months of the year, leaving economic activity marooned 7.5% short of its pre-crisis level.
“So while the economy has recouped 64% of the fall in GDP in four months, it may take until late-2022 to get back the remaining 36%.”