Britain faces “hard times ahead”, Chancellor Rishi Sunak warned yesterday, as figures showed the economy slowing as coronavirus once again gripped the country.
Growth surged by a record 15.5 per cent between July and September as the UK rebounded out of recession in the summer, fuelled by staycation holidays and the Eat Out To Help Out scheme.
But the recovery slowed sharply even before this month’s second English shutdown was ordered, as local restrictions were imposed around the country.
Mr Sunak said: “There are still hard times ahead, but we will continue to support people and ensure nobody is left without hope or opportunity.”
The Office for National Statistics said third-quarter growth was the highest since records began in 1955 and came as restrictions were eased after the spring shutdown.
The economy bounced back from the 19.8 per cent contraction during April, May and June.
But month-on-month, growth slowed to 1.1 per cent in September as Eat Out To Help Out ended, and the ONS revealed gross domestic product was still 8.2 per cent below levels in February before the crisis struck.
The worsening economic climate came as the UK recorded 33,470 new Covid-19 cases – the highest daily number of new infections so far.
NHS England medical director Stephen Powis warned when the lockdown ends on December 2, “we will not be going back completely to normal”.
Mr Powis told last night’s Downing Street press conference: “There will need to be other measures in place because while this virus is still here, we need to ensure that infection rates stay as low as possible and that we reduce the chance of transmission.”
The England-wide shutdown is aimed at curbing rises in infections and deaths, but will worsen the economic gloom.
GDP in the third quarter was still 9.7 per cent smaller than at the end of 2019 – twice as big as falls in Italy, Germany and France, and nearly three times the size of the US drop, the ONS said. Its deputy national statistician Jonathan Athow said: “While all main sectors of the economy continued to recover, the rate of growth slowed again, with the economy well below its pre-pandemic peak.”
The Chancellor said the figures “show that our economy was recovering over the summer, but started to slow going into autumn”. Mr Sunak added: “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.”
Bank of England Governor Andrew Bailey said the figures reveal the “huge gap” between output now and levels from before the pandemic struck.
James Smith, research director at the Resolution Foundation think tank, said: “The UK’s record quarterly economic growth in the third quarter reflects a rapid bounce back as Britain emerged from lockdown.
“But growth petered out by September, with the economy still 8 per cent lower than pre-pandemic levels, and it will have deteriorated further over the winter.”
The National Institute of Economic and Social Research is predicting there will be a 2.2 per cent plunge in growth during the last three months of the year.
Senior economist Dr Kemar Whyte added: “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 the lockdown from November.
“Our expectations for the fourth quarter and beyond will depend on the stringency and duration of ongoing coronavirus lockdowns – local and national.”
Howard Archer, chief economic adviser to the EY Item Club, feared growth could tumble by around 4 per cent in the fourth quarter.
“There seems little doubt that a renewed national lockdown will cause the economy to contract again in the fourth quarter – very possibly, by an appreciable amount,” he said.