UK economy grows in September but recovery slows

·3-min read
Office workers and commuters walk through Canary Wharf in London during the morning rush hour. Picture date: Wednesday October 6, 2021.
Growth in the economy for the year is also slightly lagging forecasts — up 6.6% rather than the 6.8% projection. Photo: PA

The UK's gross domestic product (GDP) continued to grow in September, but lost momentum, remaining below pre-coronavirus levels. For Q3, it grew 1.3%, missing expectations of 1.5%, according to the latest ONS data. 

The economy is estimated to have grown by 0.6% in September. It also remained 0.6% below its pre-COVID-19 pandemic level of February 2020.

Growth in the economy for the year is also slightly lagging forecasts — up 6.6% rather than the 6.8% projection. 

“As the world reopens we know that there are still challenges to overcome," said chancellor of the exchequer Rishi Sunak. 

The economy continues to recover from COVID and thanks to schemes like furlough, the unemployment rate has fallen for eight months in a row and we’re forecast to have the fastest growth in the G7 this year."

Services output grew by 0.7% in September 2021 and human health activities grew by 6.4%, mainly because of a large rise in face-to-face appointments at GP surgeries in England.

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A 13.3% fall in car and motorcycle sales sales, retail repair and trade hit consumer-facing services, which fell by 0.6%. All other services rose by 1.0%.

Consumer-facing services are 5.5% below their pre-coronavirus (COVID-19) pandemic levels, while all other services are now 1.0% above.

“Notably, business investment remained well down on pre-pandemic levels in the three months to September. Meanwhile the trade deficit widened as goods exports to non-EU countries fell and imports – particularly of fuel – from non-EU countries increased," said ONS chief economist Grant Fitzner.

GDP growth for July 2021 was also revised from a 0.1% fall to a 0.2% fall, while August 2021 has been revised from 0.4% growth to 0.2% growth; these revisions were mainly because of late survey data for the services industries.

Some blamed the supply chain crisis on the shortfall in GDP for the quarter. 

“There’s no denying that this rounded off a tough quarter for businesses, with supply constraints biting hard. A combination of rising COVID cases and shortages of raw materials, components and labour came together to present significant headwinds to growth," said Alpesh Paleja, Confederation of British Industry lead economist.

“While the Supply Chain Advisory Group is a positive development, demonstrating the government working in partnership with business to tackle current challenges, constraints remain acute. So it’s important this spirit of collaboration is maintained to safeguard the UK’s recovery.”

Others lamented the lack of growth and warned on a looming cost of living crisis this winter. 

Jonathan Gillham, chief economist at PwC UK said the data presents a "stark picture of the uneven nature of the recovery," noting the sectors recovering well are directly or indirectly benefitting from government support or rebounding following the relaxation of lockdown.

“Today’s GDP data show that combined growth in July, August and September was no better than its pre-financial crisis average, leaving the UK economy furthest from its pre-pandemic level among G7 countries," said James Smith, research director at the Resolution Foundation.

"This slowdown is taking place despite social distancing restrictions being removed in July, suggesting that supply-chain disruptions and shortages have derailed the recovery.

“The sharp growth slowdown and the prospect of a winter living-standards ‘crunch’ providing a further headwind in the coming months mean that we are not out of the pandemic woods yet. That is why the Chancellor was right to provide more support for the economy at the Budget, and the Bank of England did not raise interest rates last week.”

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