UK economic growth faster than expected, sets scene for rebound
The UK’s pandemic-battered economy grew faster than expected in March as it gathered speed for a bounce-back from its coronavirus slump of 2020, according to official figures issued on Wednesday.
The 2.1% growth from February was led by the reopening of schools which, with Covid-19 testing and vaccinations, pushed up activity in the public sector and by retailers as consumers spent some of their lockdown savings.
There was also a burst of work in the construction sector ahead of the expiry of a tax break for homebuyers.
Analysts polled by Reuters had expected monthly growth of 1.3% for the world’s fifthbiggest economy.
“Businesses and the government alike will feel this data marks a turning point,” Ana Boata, head of macroeconomic research at trade credit insurer Euler Hermes, said.
“With the ongoing easing of restrictions, confirmed this week by the prime minister, there’s hope that this could be the start of a long hot summer for British businesses.”
In the first quarter of 2021, when Britain was under a third lockdown, GDP shrank 1.5%, said the Office for National Statistics (ONS). Though this hit was less severe than initially feared, Pantheon Macroeconomics economist Samuel Tombs said it meant Britain almost certainly remained the laggard among the G7 rich countries for the fourth quarter
running. But British GDP appeared to be on course to grow 5% in the second quarter, “which should mean the UK finally hands over the wooden spoon to another G7 economy”.
The Bank of England (BOE) said last week it expected the economy would recover quickly as the country speeds ahead with Europe’s fastest vaccination programme and coronavirus restrictions are lifted.
The central bank’s forecast for 7.25% growth in 2021 would be the fastest since the World War 2 rush to rearm, though by comparison, GDP collapsed by 9.8% in 2020, its deepest slump in more than three centuries.
“Despite a difficult start to this year, economic growth in March is a promising sign of things to come,” said chancellor of the exchequer Rishi Sunak. “As we cautiously reopen the economy, I will continue to take all the
steps necessary to support our recovery.” Britain’s economy remains 8.7% smaller than at the end of 2019. The BOE expects it will be back to its prepandemic size by the end of this year.
MORE REOPENING AHEAD
Prime Minister Boris Johnson allowed nonessential shops to reopen and outdoor hospitality to resume in April in England and there have been signs that the economy accelerated in response.
Further relaxations are due next week before the lifting of almost all remaining restrictions in late June.
The ONS data showed Britain’s dominant services industry grew 1.9% in March from February, its strongest growth since last August, while manufacturing and construction also grew more strongly than expected by analysts in the
Reuters poll. Trade figures issued showed Britain imported more goods from non-EU countries than EU countries during the first quarter for the first time since records began in 1997.
The ONS warned that it was too soon to say if this was the start of a trend or just short-term disruption. “Exports of goods to the EU continued to increase in March, and are now almost back to their December level,” said ONS statistician Darren Morgan.
“However, imports from Europe remain sluggish.”
Business investment fell almost 12% from January to March. The ONS said some companies brought forward investment plans to late 2020 to avoid disruption caused by leaving the EU’s single market, while others delayed plans for early 2021 to take advantage of a new tax break that was launched in April.