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Coronavirus: The UK economy's rebound lost momentum in July

Tom Belger
·Finance and policy reporter
·3-min read
General view of Tyne Bridge, Sage Gateshead and Gateshead Millennium Bridge in Newcastle
Newcastle as new figures show the UK economy continued to rebound in July, but at a slower pace. Photo: PA

Britain’s economy continued to rebound from the deepest recession on record in July, but the pace of recovery slowed more than expected.

Official figures published on Friday showed gross domestic product (GDP) — the total value of goods and services produced in Britain — grew by 6.6% in July, the most recent month data was available.

The Office for National Statistics (ONS) data showed the third month in a row of expansion, but momentum appears to have slowed even as firms gradually emerged from national lockdown.

July’s figure was slightly lower than the 6.7% expected by analysts, and significantly lower than the 8.7% growth seen in June. Total output remains 11.7% below levels seen in February prior to the onset of the pandemic.

“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,” said the ONS’ director of economic statistics Darren Morgan.

The decline over the past three months dwarfs the collapse in output during the global financial crisis. Chart: ONS
The decline over the past three months dwarfs the collapse in output during the global financial crisis. Chart: ONS

GDP fell by 20.4% between April and June. It was the steepest quarterly decline since records began in 1955.

Rolling three-month data shows a much less steep 7.6% decline between May and July, though it is still more than three times the 2.1% decline seen during the worst point of the global financial crisis.

READ MORE: Millions of households face £1,000 cliff edge next year

Chancellor Rishi Sunak said Friday’s GDP figure was “welcome” but added: “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.”

Watch: Yahoo UK Finance Reporter Edmund Heaphy explain what a V-shaped economic recovery?

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The economic recovery still does not look V-shaped, even though virtually all restrictions on economic activity had been lifted by July.

“The recovery remains especially weak in consumer-facing parts of the services sector. Output in the arts and recreation sector was 31% below its pre-Covid level in July, while output in the accommodation and food services sector was down 60%.”

Growth in services, which makes up around four-fifths of the economy, came in at 6.1%, lower than the 7% expected by analysts in a Reuters poll.

Tombs said he expects the UK economy to still be 5% below its peak by the end of the year and said it was likely both the Bank of England and the Treasury would have to take additional measures to stimulate growth.

While the service sector disappointed, other parts of the economy saw rapid expansion in July. Construction output rose 17.6% and manufacturing output rose by a better-than-expected 5.2%.

READ MORE: What is a V-shaped recovery?

“Education grew strongly as some children returned to school, while pubs, campsites and hairdressers all saw notable improvements” the ONS’ Morgan said. “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.”

Additional reporting by Oscar Williams-Grut.