Yahoo Finance UK economy slows further in August despite Eat Out to Help Out
The UK’s economic bounce back from COVID-19 continued to lose steam in August.
The Office for National Statistics (ONS) said on Friday that UK GDP grew by just 2.1% in August. Economists had been expecting monthly growth of 4.6%.
The figure, which is an early estimate and could be subject to revisions, shows momentum continues to slow. Output expanded by 6.6% in July and 8.7% in June, following a record 19.8% slump in the second quarter of 2020.
The slowdown came despite a boost for the hospitality sector through the government’s Eat Out to Help Out scheme. The meal subsidy programme helped boost output in the food and accommodation industry by a huge 71.4% in August.
“The combined impact of easing lockdown restrictions, Eat Out to Help Out Scheme and “stay-cations” boosted consumer demand,” the ONS said.
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While food and accommodation surged, most other sub-sectors of the economy struggled to register growth above 1%.
August marked the fourth consecutive month of growth in GDP but the UK economy remains around 9.2% below pre-pandemic levels. The performance is likely to dash hopes of a quick, V-shaped recovery in output.
“The sharp slowdown in growth indicates that the recovery may be running out of steam,” said Suren Thiru, head of economics at the British Chamber of Commerce (BCC).
Chancellor Rishi Sunak said: “Today's figures show our economy has grown for four consecutive months, but I know that many people are worried about the coming winter months.
“Throughout this crisis, my single-focus has been jobs – protecting as many jobs as possible, and providing support for people to find other opportunities where this isn’t possible. This goal remains unchanged.
“That’s why we’re investing billions to help people back to work and provide fresh opportunities to those that have sadly lost their jobs so that nobody is left without hope.”
The BCC’s Thiru said more support from government may be needed.
“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,” he said.
“The government must stand ready to help firms navigate a difficult winter, beyond the Chancellor’s recent interventions.”
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The government’s job support scheme is set to end this month. The ONS this week estimated that 9% of the UK workforce remain on furlough. Economists think many will be out of work when the scheme ends.
Sanjay Raja, Deutsche Bank’s chief UK economist, said GDP was likely to continue to slow as we move into winter.
“While the pace of the initial rebound may have been impressive, the path forward for the UK economy will be more difficult particularly for the services sector, which remains vulnerable to further localised and industry targeted lockdowns,” Raja said in a note previewing Friday’s GDP announcement.
