UK Economy rebounds as Covid restrictions ease

The UK economy rebounds as Covid restrictions ease. Official figures show it grew by 4.8% between April and June, as most businesses emerged from lockdown.

Data from the Office for National Statistics (ONS) shows that retail, hotels and restaurants fuelled the expansion in gross domestic product (GDP). The economy was also boosted by education as schools reopened in the second quarter.

However, the figure is a bit lower than the 5% expected by the Bank of England.

The UK economy is currently 4.4% smaller than it was prior to the coronavirus pandemic.

The economy shrank by 1.6% in the first three months of the year, as Covid restrictions remained in place. But growth came in the second quarter as more businesses reopened.

Chancellor Rishi Sunak says the figures “show that the economy is recovering very strongly, exceeding many people’s expectations”. But is careful to not be complacent about it. He says our economy and public finances have both “experienced a significant shock”, and it will “take us time to fully recover”.

However, some economists expect that the economy will return to its pre-Covid size later this year. They believe it can “surprise most forecasters by emerging from the pandemic without much scarring”.

Consumer growth

Non-essential retail, hairdressers, gyms and outdoor dining all reopened in April. Pubs and restaurants were allowed to serve customers indoors in May. Meanwhile, cinemas, theatres and galleries were able to open their doors again.

Consumer spending was the biggest driver of growth, rising by 7.3% over the quarter, above expectations. A large proportion of UK spend comes from “social spending” like restaurants, hotels and leisure. This is what made our economy so extremely vulnerable to lockdowns. In 2020, the nation shrank the fastest of the G7 countries. But on the flip side, it also became one of the quickest to recover in 2021 as restrictions lifted.

Despite the increase in spread of the Delta variant, the UK consumer continued to spend, pushing output to within 5% of pre-pandemic levels. Some feared that this kind of growth would take far longer to come.

But there is still uncertainty about what will happen next as the safety net of the furlough scheme ends in October. Livelihoods will no longer have protection, and economists think some job losses are likely. The biggest risk though is of further variants emerging and a resurge of infections leading to the return of restrictions. Although policymakers predict we will not have to endure anymore national lockdowns. The successful vaccine programme in the UK will stand the economy in good stead. Access to vaccinations is the key to escaping the pandemic.

So far, fears that the Delta variant and the ‘pingdemic’ would impact growth are unfounded. Although the recent heavy rainfall may affect figures.

A tough time

The economy may be rebounding, but the pandemic is still impacting on the restaurant and hospitality trade.

The lockdown has been hard for many businesses to deal with, causing a lot of insecurity. One owner of a family-owned Indian restaurant says she is “grateful” for the furlough scheme as it enabled her to keep all of her employees. But rent and financial costs still built up.

However, she remains optimistic as bookings pour in to dine at her restaurant in London’s Covent Garden, which recently served American actors Paul Rudd and Dan Levy. People are booking months in advance, and they even had 1,300 in five hours when all the dates started opening up.

Travel restrictions do remain a concern though, as a business in central London relies on trade from tourists. The constantly changing rules are confusing and deterring people from travelling overseas to the UK.

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