Despite an ease in lockdown restrictions and permission to restaurants to have dine-in facilities, the United Kingdom (U.K.) economic growth was confined to 2.1% in August 2020.
As per the date released by the Office for National Statistics today, i.e., Friday, October 9, 2020, the growth forecast for August was around 4.6%. This was the 4th continuous month of economic growth following a 20% contraction in April 2020.
Relatively, the growth rates of May, June and July stood at 2.7%, 9.1% and 6.4% respectively. Now with new data coming-in, the hopes of revival of economy look grim. The Gross Domestic Product (GDP) remains 9.2% below as compared to February 2020.
Food services and accommodation and food services contributed 71.4% in August 2020, after the Government announced the initiative, “Eat Out to Help Out”, subsidising 100 million meals at restaurants, cafés and pubs.
Speaking on the occasion, the Head of Economics at the British Chambers of Commerce – Suren Thiru said, “While the latest data confirms a rebound in economic activity continued into August, the sharp slowdown in growth indicates that the recovery may be running out of steam, with output still well below pre-crisis levels.”
While the manufacturing grew by 0.7%, the construction industry saw 3% growth which was 11% less as compared to pre-pandemic period. In construction, output rose by 3% leaving it almost 11% below its pre-crisis peak, while manufacturing grew just 0.7%.
The hospitality sector needs a stimulus for its survival. The pandemic-caused restrictions don’t allow the businesses to function after 10:00 p.m. This majorly affects the hospitality industry. In order to provide some support to the ailing economy, the Finance Minister of U.K. – Rishi Sunak announced a package for businesses that are required to remain close, owing to the widespread pandemic. Companies will receive cash grants of upto £ 3,000 per month to help cover costs. The Government will pay 2/3rd of the wages of staff who cannot work, upto a maximum of £ 2,100 per month. The program will run for 6 months commencing November 2020.
There are speculations that the economy will further deteriorate, resulting into job losses. Between March and August 2020, more than 700,000 people lost their job. As per the estimates of Bank of England, U.K. will have more than 2.5 million jobless people by the end of this year.
Capital Economics, the London based research agency says that GDP will increase 2% in September 2020, before flatlining in the last three months of the year. Stagnation in the fourth quarter could be followed by worse in early 2021, especially if the trade deal with European Union (E.U.) fails. Even if there is a post-Brexit deal, the businesses will have to face billions of dollars in added costs relating to border checks and customs rules.
