Economic recovery stalled in July but autumn could be rosier, economists say
The UK’s bounceback from the pandemic has slowed to a near standstill according to figures from the Office for National Statistics, pushing the country into a new phase of recovery, experts say.
Gross domestic product (GDP) rose by just 0.1% in July, a significant slowdown from 1% in June, and far off the 0.5% that economists had predicted.
“The recovery in the UK economy has stalled,” said Ed Monk, associate director at Fidelity International, who cautioned that the full impact of supply chain bottlenecks will not show up in the July figures, meaning more pain down the line.
“It now looks like the wait for the UK to regain the ground lost since the start of the pandemic will last well into next year,” he said.
Martin Beck, senior economic adviser to the EY ITEM Club said that the UK has already picked the low-hanging fruit as it bounces back from the pandemic.
“The bulk of the gains from the reopening of the economy are now behind us, so a tougher phase of the recovery beckons,” he said, though adding that less self-isolation in August will probably cause GDP figures to look rosier.
Shadow chief secretary to the Treasury Bridget Phillipson said that the Government’s only plan was to plough on with recently announced tax rises and cutting Universal Credit.
“The concerning figures today show that just as the UK economy ought to be getting back to normal, disruption to supply chains and other shortages mean our recovery is hitting the brakes,” she said.
Chancellor Rishi Sunak remained upbeat despite the stalling recovery: “Our recovery is well under way thanks to the success of the vaccination rollout and the roadmap, with more employees on payrolls than at any point since last March.
“I am confident that – supported by our plan for jobs – we’ll continue to recover from the pandemic, we’ll see more new jobs, and we will build back better.”
His optimism was backed by Kitty Ussher, chief economist at the Institute of Directors, who pointed out that much of the slowdown came from the real estate and legal sectors settling back into normality as stamp duty holidays tapered off.
“Going forwards, we expect the economy to continue its upward trend: the vaccine rollout has allowed schools to start the new term with less curbs on their activity, there is every reason to think that the autumn will also be strong,” she said.
“Any shadows that do exist will now come from where transportation and labour shortages may start to affect businesses’ practical ability to trade or the cost of doing so.”