Britain's economy experienced a record rebound between July and September, growing 15.5 per cent. But the vast majority of this recovery took place early on – and there are worrying signs that this slowdown has continued in the months since.
Towards the end of the summer, monthly growth figures were already starting to disappoint. Despite August being the most open month this year since the pandemic struck, with restrictions on businesses and social gatherings the most liberal they had been since mid-March, growth was only 2.2 per cent, followed by 1.1 per cent in September. This major slowdown shows that the economy can only recover so much while major Covid-19 restrictions remain in place. Today’s figures from the Office for National Statistics show that October has continued the trend, with economic growth of only 0.4 per cent.
Despite it being the six consecutive month of growth, the economy remains 7.9 per cent smaller than it was in February – with the Office for Budget Responsibility forecasting we are still two years away from making a full recovery. The introduction of the tier system is thought to have stalled growth. The service sector, which makes up most of the economy, grew by just 0.2 per cent with accommodation and food services output contracting by 14.4 per cent, at least partly thanks to the additional restrictions.
GDP growth is not expected to stay stagnant: but it looks like Britain’s path back to pre-Covid levels of output will be a roller coaster. Growth figures for November are all-but-guaranteed to show another economic contraction – albeit a significantly smaller one than seen in April – as a result of England’s second lockdown and the forced closure of non-essential businesses. This rules out the possibility of a V-shaped recovery. Even if circumstances change and allow the economy to pick up significantly next spring, a sharp recovery will be following on from a W-shaped trail.
Still, there are reasons to be optimistic. The UK’s approval of the Pfizer vaccine (which is thought to be imminent in the United States as well) has led forecasters to emphasise their optimistic scenarios. Capital Economics estimates the ‘vaccine bounce’ will get the economy back to pre-Covid levels by early 2022. If more vaccines – Moderna’s and Oxford-AstraZeneca’s – are approved, the timeline for inoculating the public and re-opening society is bound to speed up.
But this isn’t simply a question of medical advancement and timelines – it’s a question of politics too. If the most vulnerable to Covid-19 are inoculated by spring, the government will have to decide how cautious or bullish an approach it plans to take on rolling back Covid-19 restrictions. Will it roll them back even when the majority of the population are yet to be vaccinated – or wait until more of the population have had the jab? Health Secretary Matt Hancock suggested it would be the former on talkRADIO earlier this week, but no milestones or targets that will see a lifting of restrictions have been publicly announced. The difference between whether it happens in April or September next year may be a matter of months, but those months will make a substantial difference to the timeline for our economic recovery.