Friday 9 October 2020 8:53 am

Coronavirus recovery stalls as UK economy grows just 2.1 per cent in August

The UK economy grew at just 2.1 per cent in August as the country’s economic recovery showed signs of stalling.

Although the figure marked the fourth straight month of growth, it was considerably lower than had been expected.

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As a result, GDP remains 9.2 per cent lower than it was before the pandemic struck in March.

Economists said that the slowdown was a clear sign that hopes for a “v-shaped recovery” were past.

August’s growth was markedly slower than that seen in both June and July, which saw the economy expand at 8.7 and 6.6 per cent respectively.

GDP had been predicted to grow at around 4.5 per cent, so today’s figures were “somewhat disappointing”, said Howard Archer, chief economist at the EY Item Club.

“The economy continued to recover in August but by less than in recent months,” said Jonathan Athow, the ONS deputy national statistician for economic statistics.

“There was strong growth in restaurants and accommodation due to the easing of lockdown rules, the Eat Out to Help Out scheme and people choosing summer ‘staycations’. However, many other parts of the service sector recorded muted growth.

British Chamber of Commerce head of economics Suren Thiru said: “While the latest data confirms a rebound in economic activity continued into August, the sharp slowdown in growth indicates that the recovery may be running out of steam, with output still well below pre-crisis levels. 

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He added that the increase was more due to government stimulus deals such as the Eat Out to Help Out initiative than proof of a “v-shaped recovery”.

Over half the growth in August came from the accommodation and food sector, where output surged by 71.4 per cent, boosted by the meal subsidy scheme and easing lockdown restrictions, the ONS said.

“Although the UK remains on course to exit recession in the third quarter, the looming triple threat of surging unemployment, further restrictions and a disorderly end to the transition period means the recent rally in economic output is likely to be short-lived.”, Thiru said.

“It was always going to be a challenge for the economy to achieve robust monthly GDP gains as recovery progressed from April’s lows. Pent-up demand has been increasingly depleted and the immediate benefits from the opening up of sectors have already been felt”, Archer said.

The rest of the key economic sectors continued to grow but did so at a far slower rate than in previous months.

Services grew at 2.4 per cent, less than half July’s 5.8 per cent rate, while production picked up just 0.3 per cent, a fraction of the prior month’s figure.

Manufacturing and construction also grew a mere 0.7 per cent and 3 per cent respectively.

Read more: IMF and WTO: Economy brighter than expected but big risks remain

KPMG chief economist Yael Selfin said the figures marked the “end of the bounce back”.

“Rising COVID-19 cases and fresh restrictions could lead to a renewed fall in activity in the last months of this year”, she warned.

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