UK logs record rebound from virus-driven recession

Britain’s economy enjoyed a record third-quarter rebound from its deepest-ever recession, data showed Thursday, but experts predict another slump after fresh coronavirus restrictions were introduced to curb the pandemic.

Gross domestic product (GDP) expanded by 15.5 percent in the July-September period, after an initial coronavirus lockdown was eased, the Office for National Statistics said in a statement.

Activity bounced back after shrinking by almost a fifth in the second quarter on the back of the first lockdown.

But the economy is still grappling with the virus fallout, according to the data, which was published one day after Britain’s Covid-19 death toll passed the grim milestone of 50,000 — the highest in Europe.

Growth slowed in September with a month-on-month expansion of just 1.1 percent, after the end of the government’s restaurant discount scheme for the devastated hospitality sector.

Output was also hit after more localised measures to control the virus were imposed in parts of northern and central England, as well as in Scotland and Wales.

Fourth-quarter gloom
England-wide restrictions, which began last week, are set to spark another slump in the current fourth quarter or three months to December, analysts warn.

“There seems little doubt that a renewed national lockdown will cause the economy to contract again in the fourth quarter,” said EY economist Howard Archer, who is forecasting a 4.0-percent drop.

The impact is however far less severe because the new measures “are less restrictive than those introduced in March”, he noted.

The National Institute of Economic and Social Research (NIESR) think tank has forecast a 2.2-percent contraction.

“Growth in the fourth quarter will be much slower than in the third quarter and is likely to turn negative, due to weaker growth in October and a second lockdown from November,” said NIESR economist Kemar Whyte.

“Our expectations for the fourth quarter and beyond will depend on the stringency and duration of ongoing lockdowns.”

Britain plunged into a historic downturn after imposing a nationwide lockdown on March 23 that lasted until mid-June.

The economy shrank by a record 19.8 percent in the second quarter after a 2.5-percent contraction in the prior three months, meeting the technical definition of a recession.

“Today’s figures show that our economy was recovering over the summer, but started to slow going into autumn,” said finance minister Rishi Sunak.

“The steps we’ve had to take since to halt the spread of the virus mean growth has likely slowed further since then.

“But there are reasons to be cautiously optimistic on the health side — including promising news on tests and vaccines.”

Sunak last week announced a new multi-billion-pound support package, extending his government’s furlough jobs scheme to the end of March.

The Bank of England (BoE) at the same time injected an extra £150 billion in cash stimulus to lift growth.

‘Encouraging’ vaccine
The ONS on Thursday said the UK economy was 9.7 percent smaller than its level late last year, in line with BoE forecasts.

The outlook brightened somewhat after US pharma giant Pfizer and Germany’s BioNTech announced Monday that their candidate for a Covid-19 vaccine had been 90 percent effective, boosting hopes of a return to normality next year.

BoE governor Andrew Bailey on Thursday described the vaccine announcement as “encouraging”, adding that it “reduces uncertainty”.