Economy 11.7% smaller than February back at 2013 levels
Here’s a sobering fact. Britain’s economy is now back to its size in 2013, during the Cameron/Osborne austerity years and the eurozone debt crisis.
That’s because the economy is still over 11% smaller than in February, even though July’s GDP was 18.6% higher than its April 2020 low.
Full story: Covid-19 recovery continues
Here’s our news story on today’s GDP report:
Experts warn UK economy faces tough times
Here’s some early reaction to this morning’s UK growth report.
Tej Parikh, Chief Economist at the Institute of Directors, fears the economy will soon hit ‘speed bumps’:
“The economy continued its rebound in July, but the hard part is still to come.
“With the lockdown lifting, production has picked up quickly. Businesses have also been adapting at pace, launching new products and shifting their operations online.
“The recovery will start to hit speed bumps into the end of the year. Local lockdowns and new restrictions heap uncertainty on businesses, and demand remains limited in many areas. Increased costs from adjusting to the pandemic will only add to companies’ cashflow headaches, and the longer this continues, the harder it will be to maintain.
BCC Head of Economics Suren Thiru argues the government must provide more support:
The UK economy is currently in a period of temporary calm, with activity buoyed by the government’s emergency support measures and the unwinding of pent-up customer demand as more parts of the economy reopened.
“However, with many firms continuing to face an unprecedented cash crisis and unemployment likely to surge as the support schemes wind down, there remains little prospect of a sustained resurgence unless substantial action is taken.
“To protect jobs and livelihoods, the government should consider extending and adapting the Coronavirus Business Interruption Loan Scheme to ensure businesses are supported sustainably over a longer period, as well as introducing a more significant package of support for firms placed under local restrictions.”
Tom Stevenson, Investment Director, Personal Investing, Fidelity International, says the outlook remains uncertain – with Brexit worries not helping
“Attention now turns to the sustainability of the upturn. August’s GDP print will show the impact of the popular ‘Eat Out to Help Out’ scheme. We already know consumer spending in August exceeded last year’s level for the first month since lockdown began, but with social distancing still in place some sectors are struggling to get back on their feet.
“We are far from out of the woods yet. Covid-19 cases are on the up again, the government is re-imposing restrictions on social gatherings and this, combined with the end of the furlough scheme next month, leaves the outlook uncertain. Deteriorating relations with the EU make a no-deal Brexit in January more likely, adding to the UK’s economic challenges and to downward pressure on the pound.”
Yael Selfin, Chief Economist at KPMG UK, is also concerned that new Covid-19 restrictions will undermine the recovery.
“July’s activity was buoyed by the steady re-opening of businesses after the initial national lockdown, partial resumption of travel and increasing demand for staycation holidays around the UK. Expect more of the same in August owing to the boost from the Eat Out to Help Out scheme.
“The hospitality sector saw a big boost in July, however activity remains well below pre-COVID levels.
“Overall GDP grew by 6.6% in July. However, the risk of a second wave of infections in the autumn could derail the nascent recovery and put the economy into a lower gear.”
Onto services…and accommodation and food suffered the worst slump over the summer, despite growing solidly in July.
Food and beverage service activities shrank by 60.1% in May-July, due to the closure of bars and restaurants.
The accommodation sector fell by 69.2% as a result of the closure of hotels and other short-stay accommodation, the ONS says.
Britain’s transport manufacturing sector suffered the worst contraction in the last quarter, while the pharmaceuticals industry grew strongly.
As this chart shows, most sub-sectors of industry are smaller than three months ago, with the wider sector 7% smaller.
Sunak: Welcome figures, but worries ahead
Here’s Chancellor of the Exchequer, Rishi Sunak on the 6.6% jump in GDP in July.
“While today’s figures are welcome, I know that many people are rightly worried about the coming months or have already had their job or incomes affected. That’s why supporting jobs is our first priority and why we’ve outlined a comprehensive Plan for Jobs to ensure nobody is left without hope or opportunity.
We’re helping people return to work with a £1,000 retention bonus for jobs brought back from furlough. And we are creating new roles for young people with our Kickstart scheme, introducing incentives for training and apprenticeships, and supporting and protecting jobs in the tourism and hospitality sectors through our VAT cut and last month’s Eat Out to Help Out scheme.”
But as I mentioned a few minutes ago, Sunak is under pressure from MPs and from thinktanks to provide more targeted help for workers worst hit by the pandemic.
Services, manufacturing, construction and agriculture all grew
Good news: every sectors of the UK economy grew in July.
Less good news: they’re all still smaller than before the pandemic, and growth did slow compared with June.
This morning’s GDP report shows that construction grew by 17.6% in July, services expanded by 6.1%, manufacturing output rose by 6.3% and agriculture expanded by 1.1%.
But as this chart shows, they’re all smaller than in February, before the lockdown.
Economy shrank 7.6% in last quarter
Here’s the big picture:
UK GDP REPORT FOR JULY
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business….
…and we kick off with some breaking news: Britain’s economy continued to recover in July as the Covid-19 lockdown eased.
The Office for National Statistic’s latest GDP figures, just released, show that the UK economy expanded by 6.6% during July.
That follows growth of 8.7% in June and 2.4% in May, after the record-breaking 20% contraction in April. And it means the economy has recovered more than half the output lost during the pandemic.
But despite the recovery, output is still sharply lower than before the virus outbreak began.
In the May-July, the ONS says, the economy shrank by 7.6% compared with the previous quarter, as the country struggled through its deepest recession in decades. That shows the challenge facing the economy, just as Covid-19 cases rise again.
The ONS director of economic statistics Darren Morgan said:
“While it has continued steadily on the path towards recovery, the UK economy still has to make up nearly half of the GDP lost since the start of the pandemic.
“Education grew strongly as some children returned to school, while pubs, campsites and hairdressers all saw notable improvements. Car sales exceeded pre-crisis levels for the first time with showrooms having a particularly busy time.
“All areas of manufacturing, particularly distillers and car makers, saw improvements, while housebuilding also continued to recover. However, both production and construction remain well below previous levels.”
Details and reaction to follow!
The GDP report comes as MPs urge chancellor Rishi Sunak to rethink his plan to end the UK job retention scheme next months.
They fear that otherwise healthy firms will crash without the furlough scheme, hampering the recovery and pushing up unemployment.
- 7am BST: UK GDP report for July
- 7am BST: UK trade balance for July
- 1.30pm BST: US inflation report for August
- 2pm BST: NIESR’s monthly UK GDP tracker for August