Yahoo Finance UK economy almost ground to a standstill before second lockdowns hit
The UK economy saw momentum slow significantly in October, even before England went into a second coronavirus lockdown.
Britain’s GDP expanded for a sixth month in a row but growth slowed to just 0.4% in October, down from 1.1% in September, according to Office for National Statistics (ONS) data on Thursday.
The rebound so far has fallen significantly short of making up the record declines seen during the first nationwide lockdown in March and April.
“Our latest estimates show that the UK economy is now 7.9% smaller than it was in February, the effects of which have been most pronounced in those industries that are most exposed to public health restrictions and the effects of social distancing,” wrote ONS statisticians.
October’s figures came in at the top of analysts’ expectations however, with consensus estimates of growth between 0.2% and 0.4%. Some forecasters had warned stagnation or declines could not be ruled out.
The latest ONS figures suggest the strain the coronavirus and tightening restrictions had on firms even when full-scale lockdowns had not yet returned for most of the month.
WATCH: UK economy still 7.9% below pre-pandemic level as growth slows
READ MORE: UK consumer spending dipped even before lockdowns returned
Lockdowns were imposed only in Northern Ireland from 16 October, Wales from 23 October, and England from 5 November.
The picture was varied across sectors. Services firms, which make up most of the economy from cafes and barbers to consultancies and banking, saw growth only edging 0.2% higher. Accommodation and food services took a significant hit from higher curbs on activity.
By contrast factories saw output rise 1.3%, with transport equipment production jumping 5.4%, while construction firms’ trade was 1% higher.
The October data bears out industry survey figures, which also showed recovery fading in October and a particularly pronounced struggle for services firms. Analysts at IHS Markit, which compiled the purchasing managers’ index (PMI) poll, said their own research showed the economy “close to stalling.”
Firms in consumer-facing sectors surveyed reported tighter restrictions on hospitality, travel and leisure leading to a slump in demand.
Separate data from the ONS also showed business turnover was down 1.6% in October on September levels.
It comes after the Office for Budget Responsibility warned last month Britain’s economy would end the year 11.3% smaller than a year earlier, marking the biggest annual collapse in more than three centuries.
“The sharp slowdown in economic output in October reflected the squeeze on activity from the re-introduction of tighter coronavirus restrictions, including the tier system in England,” said Suren Thiru, head of economics at the British Chambers of Commerce.
He warned: “October’s slowdown is likely to be followed by a significant contraction in economic activity in November as the effects of the second coronavirus lockdown are felt, despite the prospect of a temporary boost from Brexit stockpiling.
“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.”
WATCH: UK economy to suffer worst downturn in three centuries in 2020
