The UK economy continues to bounce back – but it’s the coming months that could pour cold water on a V-shaped recovery. The economy grew 6.6 per cent in July, according to data from the Office for National Statistics, with the return of pubs, restaurants, hairdressers and more non-essential shops giving us another boost back towards pre-Covid levels. But there’s still a long way to go: despite a record-breaking growth rate between May and July, Britain is still nearly 12 per cent below its GDP level in February 2020, having experienced a record-breaking contraction – the biggest seen in 300 years, and the worst of any major economy during the crisis so far.
If every following month brought about July levels of growth, we’d achieve recovery in no time – but that’s not how this is likely to play out. July’s figures, while strong, were slightly lower than June’s rebound of 8.7 per cent, suggesting that month-on-month recovery may have already peaked – and slowed. While August is likely to see a boom for the food and drink sector, which benefited from the Treasury’s Eat Out to Help Out scheme, the big boost that comes from sectors reopening will have already been felt in the majority of industries. As Capital Economics notes this morning, ‘now that most sectors in the economy are open again, there is little scope for further large rises in monthly GDP.’
What's more, GDP recovery requires economic sectors to stay open. Scenarios from the big-hitters like the Bank of England and the Office for Budget Responsibility show varying degrees of recovery but none of them assumes continuing liberalisation of the economy (and do not include the impact of local or national lockdowns, or renewed restrictions).
Yet announcements just this week suggest the UK could soon be going in the opposite direction: the move to make gatherings of more than six people illegal is going to take its toll, not just socially, but on the economy as well. It’s essentially a ban on group trips to the pub or restaurants, which will be felt acutely by the hospitality industry. These renewed lockdown restrictions are coming in early autumn, which doesn’t bode well for what may come in the following months, as colder weather sets in, people can’t meet outdoors as they did in the summer, and winter flu symptoms start to emerge.