The economic recovery in the UK all but ground to a halt in October, as Gross Domestic Product grew at its weakest rate for six months
According to data released from the ONS on Thursday, GDP increased 0.4% in October having expanded 1.1% in September. It was the sixth straight month of increases. However, October’s figure was the weakest growth since the first lockdown and the economic fall out from it.
Set against a backdrop of heightened Brexit talks and much of the UK under a national lockdown, the latest GDP data shows that the economic recovery is slowing and will slow further.
Pearson, director at investment platform EQi said:
“Despite the second lockdown in England being lifted, much of the UK remains in limbo with many businesses in the hospitality and arts sector unable to take part in what should be their busiest season,”
“Coupled with the ongoing uncertainty around a post-Brexit trade agreement, it’s likely the UK economy won’t recover to its pre-pandemic state for years.”
Richard Pearson
October’s GDP figure is 23.4% higher than its April 2020 low. In April, a record fall of 19.5% was recorded as the first lockdown decimated the UK economy, in particular the services and hospitality sectors.
The ONS data also showed in October that the services sector grew by 0.2%, the production sector by 1.3% and the construction sector by 1.0%.
Ruth Gregory, economist at Capital Economics commented on Thursday’s GDP figures, saying:
“The economy continued to grow in October, but at a snail’s pace. And with the COVID-19 restrictions likely to remain in place for some time, the economy is in for a difficult few months yet.”
Ruth Gregory
What’s Next for UK GDP?
The signs are not good for UK GDP. Despite a sixth consecutive increase in GDP, the weak growth will only get weaker as the country copes with a near-national lockdown.
According to Reuters, Government forecasters do not expect the UK economy to regain its pre-COVID size until the end of 2022. Meanwhile, the Organisation for Economic Co-operation and Development predicted Britain’s recovery would be weaker than everywhere except Argentina.
For the fourth quarter, more doom is expected to be reported. Economists at Morgan Stanley predict a 3% decline in UK GDP in the final quarter of the year.
GDP is expected to have declined by around 4.5% on a monthly basis in November, making it 13% below pre-pandemic levels.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics pointed towards the inevitable spike in infections with the Christmas period approaching:
“With Christmas celebrations set to boost transmission of the virus further, we think it is inevitable that tier three restrictions, requiring the closure of the hospitality sector and indoor leisure facilities again, will apply to virtually all of the UK in January,”
Samuel Tombs
All eyes will now be on the ongoing Brexit talks and what impact the impending Brexit will have on a slowing UK economy.
