Growth stalls as Covid restrictions hit UK economic recovery

  • Video analysis from ITV News Business and Economics Editor Joel Hills

The UK economy ground almost to a standstill in October as restrictions were tightened across the country to try to curb rising cases of coronavirus.

Britain's gross domestic product (GDP) grew by just 0.4% in October, the Office for National Statistics (ONS) said.

The small rise marks the sixth month in a row of recovering output from the nadir of the recession in April - but GDP remains 7.9% below pre-pandemic levels.

ITV News Business and Economics Editor Joel Hills said the Office for Budget Responsibility (OBR) does not expect the economy to recover to pre-coronavirus crisis levels until 2022 - or the end of 2023 in the event of a no-deal Brexit.

Growth was significantly down from 1.1% in September and the outlook is gloomy for November as the one-month lockdown across England saw non-essential shops shut and pubs, cafes and restaurants forced to close except for takeaways.

Wales introduced a circuit breaker lockdown in October, closing all bar essential shops, while Northern Ireland was put under a two-week lockdown that ended in the first week of December.

Huge swathes of Scotland were put under level four restrictions in November, forcing pubs and restaurants, museums and non-essential shops - and close contact services – such as hairdressers, barbers, tailors and beauticians – to shut.

Chancellor Rishi Sunak said: “I know people are worried about the winter months, but we will continue to support people through our Plan For Jobs to ensure nobody is left without hope or opportunity.”

The figures show that the services sector was the hardest hit in October, with growth almost grinding to a halt – at 0.2% against 1% in September as pubs and restaurants were hit by the 10pm curfew and tighter restrictions.

But the manufacturing and construction sectors proved more resilient in October, growing 1.7% and 1% respectively, as they were largely spared from the tighter restrictions.

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Jonathan Athow, deputy national statistician at the ONS, said: “The UK economy has now grown for six months running but still remains around 8% below its pre-pandemic peak.

London's Oxford Street. Restrictions have hit the high street hard. Credit: PA

“Public services output increased, while car manufacturing continued to recover and retail again grew strongly.

“However, the reintroduction of some restrictions saw services growth hit, with large falls in hospitality, meaning the economy overall grew only modestly.”

The data shows that compared with a year earlier, GDP fell 8.2% in October and over the three months to October, growth slowed to 10.2% from 15.5% between July and September.

The ONS said the six-month rebound since the record 19.5% fall in April means the economy has recovered by 23.4%.

But GDP has still not fully made up the mammoth 25.3% fall across the first and second quarters of 2020.

The British Chambers of Commerce (BCC) warned of a difficult year-end for the economy, with the December 31 Brexit deadline also looming large.

BCC head of economics Suren Thiru said: “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.”

Howard Archer at the EY Item Club is forecasting GDP to drop up to 5% in November, but said a Brexit stockpiling boost for factories will mean a fourth quarter contraction of “no more than 2%”.