Figures just released for economic growth in August have disappointed analysts' expectations. Whilst the economy grew by 2.1%, helped in part by the Eat Out to Help Out scheme, this was only half of what was anticipated. On the positive side it was the fourth successive month that the economy has grown; but on the negative the growth rate was much reduced when compared to that seen in June (8.7%) and July (6.6%). This leaves the economy 9.2% smaller than it was before the pandemic. There was a marked variation when looking at different sectors too. Staycations have certainly helped some and construction seems to be doing reasonably well (though it dropped back in August). Manufacturing however shows a far patchier picture and car and aircraft production was well down on the position at the beginning of the year.
Analysts suggest that the figures show that a V-shaped recovery is highly unlikely. Their slightly gloomy outlook is fed by various other factors that are coming into play. One is the upward trend of new cases which is already feeding local lockdowns as we discuss elsewhere in this briefing. This is likely to constrict economic growth. The furlough scheme as we know is also ending and that muddies the waters further. The clock is also ticking on Brexit with a clean break from the EU due to come into effect on 1 January 2021 and with no deal as yet agreed; a complication and uncertainty that business could well do without.
The UK is not at the moment in a good place economically compared to a number of other countries. The reliance that the economy has on services leaves the UK dangerously exposed to serious economic fallout from the pandemic. Whilst Boris Johnson has talked this week of building a green economy the steps that need to be taken to do this are long-term in nature. If the rebuilding of the economy along these lines does take place it will be some years into the future before the full fruits of it become apparent. In the meantime the economy has to at some level survive even if it shows no signs as yet of thriving. It is likely to be a challenging winter ahead; and not just from a public health perspective either.
Wayne Bartlett is an author for accountingcpd. To see his courses, click here.