UK growth slows sharply in third quarter amid supply chain woes

ITV News Business and Economics Editor Joel Hills reports on how Britain’s recovery from its third Covid-19 lockdown slowed sharply over the summer

The UK economy grew by 1.3% between July and September, down from 5.5% in the previous three months, the Office for National Statistics has said.

The figures suggest supply chain problems - caused by a shortage of lorry drivers and workers isolating due to Covid-19 - have slowed economic growth.

Growth picked up in September to 0.6%, which was better than expected, but revisions for July and August showed the performance was worse than first thought.

There was a 0.2% contraction in July (when the 'pingdemic' hit), against the 0.1% previously estimated, and August showed growth of 0.2%, against the initial 0.4% estimate.

Car sales have been hit by a shortage of semiconductor chips, which in turn hit the car renting and leasing industry. Construction projects were also delayed due to difficulties getting materials, according to the ONS.

The economy in September was 0.6% below pre-pandemic levels seen in February 2020.

When look at the third-quarter of 2021, the economy is 2.1% below pre-pandemic levels.

The ONS said gross domestic product (GDP) in September was kept up by the health sector, as more people went to the doctors, and as people returned to offices and schools.

Chancellor Rishi Sunak admits the UK is facing supply chain shortages

Grant Fitzner, chief economist at the Office for National Statistics, said: “Growth picked up in September and the UK economy is now only slightly below pre-pandemic levels.

“This latest increase was led by the health sector, boosted by more visits to GP surgeries in England.

“Lawyers also had a busy month as house buyers rushed to complete purchases before the end of the stamp duty holiday.

“However, these were partially offset by falls in both the manufacture and sale of cars.

“Notably, business investment remained well down on pre-pandemic levels in the three months to September.”

Some shops struggled to avoid empty shelves as staff isolated amid Covid ‘pingdemic’ in July Credit: PA

Compared with pre-pandemic levels, growth in the car trade and repair sector was down 13.7% in September.

Meanwhile, there was a 2.9% rise in fuel sales by volume in September due to panic-buying as some petrol station closed due to lorry driver shortages.

Services output rose 1.6% between July and September, down from 6.5% in the second quarter.

Manufacturing saw a 0.3% fall and the construction indestry saw a 1.5% decline.

The slowdown of economic growth raises the threat of stagflation - slowing growth combined with rising inflation - as the costs of energy and fuel soar and prices for other products increase due to supply issues.

The Bank of England warned that inflation will rise from 3.1% to 4.5% by November and hit 5% next April, the highest level for a decade.

The Bank said it resisted raising interest rates last week to tackle soaring inflation as it wanted to see how the jobs market held up after the end of furlough and how the economy would fare with the supply issues.