Economic growth slows sharply, ONS figures reveal

Brian West

11 December 2020 16:26 GMT

With restrictions tightened to control the spread of a second wave of Covid-19, it is no surprise to learn that UK economic growth slowed sharply in October.

Official figures from the Office for National Statistics (ONS) said gross domestic product (GDP) rose 0.4 per cent month on month, marking the sixth month in a row of recovering output from the depth of the recession in April.

But growth dipped significantly from 1.1 per cent in September as new restrictions were drafted in to try to end the rising cases of the virus. Some areas of the economy such as education, retail and car manufacturing still grew strongly in October but in contrast services growth almost ground to a halt.

As pubs and restaurants were hit by the 10pm curfew and other measures a huge 79% of businesses in the service sector reported worse business than last year and in the hardest hit sectors – travel, the creative arts and entertainment - business was still less than half its pre-pandemic level.

With the economy still 7.9 per cent below pre-pandemic levels the concern now is that GDP for November and possibly the final quarter, will go back into reverse due to the second national lockdown and subsequent tighter tiered restrictions.

It seems that not even a temporary boost from Brexit stockpiling will be enough to offset the negative impact of Covid-19 as the second wave of the pandemic tightens its grip.

The British Chambers of Commerce (BCC) warned of a difficult year-end for the economy, with the December 31st Brexit deadline also looming large.

Predicting a significant contraction in economic activity in November, Suren Thiru, BCC head of economics, said:

“While a vaccine offers real hope, failure to avoid a disorderly end to the transition period or further lockdown restrictions before a mass vaccine rollout is achieved would severely drag on any economic recovery.”

Falbros sales director Alex Falzon Ewen comments he isn't surprised that the UK’s economic growth inevitably weakened as restrictions in October increased to prevent the spread of the virus. Whilst acknowledging the same concerns as the BCC, Ewen strikes a more optimistic note. He believes the longer-term prospects are brightening and commented:

"With the vaccine programme now being rolled out and provided a trade deal with the EU can be agreed, we can start to look forward to GDP recovery in 2021 with greater confidence.”

Adam Verity, the BBC’s Economics Correspondent also provides some useful context when commenting:

"Growth in economic activity of 0.4% in a month wouldn't be bad in another context; if repeated every month that would mean stellar annual growth (such as we haven't seen in decades) of 4.8%.
But we need to remember, the economy this year has done a terrifying bungee jump. After plummeting in the spring, it has bounced back since May. In the autumn, the bungee cord was slackening.”

There is clearly a consensus that in the short-term the UK faces some very testing times but the optimism of entrepreneurs such as Ewen will hopefully be a key driver in 2021 and 2022. Many would argue that the UK is never stronger than when it has its back to the wall.

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