UK economy is stuck ‘in the doldrums’ as growth lower than forecast
THE UK economy is recovering slower than experts predicted, according to official figures.
Data released by the Office for National Statistics (ONS) shows that national income grew by just 1.8 per cent in May – lower than the 5% rise predicted by many economists.
The figures also reveal that GDP is still 24.5% down from where it was in February, prior to the coronavirus pandemic and subsequent lockdown.
Jonathan Athow, deputy national statistician at the ONS, said the economy was “in the doldrums” .
On the latest figures for May, he said: “Manufacturing and house-building showed signs of recovery as some businesses saw staff return to work.
“Despite this, the economy was still a quarter smaller in May than in February, before the full effects of the pandemic struck.
“In the important services sector we saw some pick-up in retail, which saw record online sales.
“However, with lockdown restrictions remaining in place, many other services remained in the doldrums, with a number of areas seeing further declines.”
The small amount of growth seen in May comes after the economy faced the sharpest decline on record in March and April, falling by 6.9% and 20.3% respectively.
The data shows the services sector grew by 0.9% in May, while manufacturing rose 8.4% and construction by 8.2% as factories and building sites started to get back to work.
SNP shadow chancellor Alison Thewliss said the UK Government had to be more ambitious to protect jobs.
The Glasgow Central MP said: “Unless the Tory government takes the bold action required there is a very real threat of prolonged economic damage and mass redundancies – with thousands of jobs on the line.”
She reiterated the SNP’S continued calls for further economic powers for Scotland, saying: “That means a recovery package of at least £80 billion in new investment, the extension of the furlough scheme into 2021, and the devolution of financial powers necessary to deliver a tailored response for Scotland.
“The UK fiscal statement failed to deliver anything close to the huge scale of response needed to meet this unprecedented crisis. The UK should be looking to other countries where much bigger investment is being made and furlough schemes are being extended. The Tories must raise their ambitions or millions of people will suffer unnecessarily.”
The British Chambers of Commerce (BCC) said the growth may be a reaction to the demand which had built up while the country was in lockdown, and may not be “evidence of a genuine recovery”.
BCC head of economics Suren Thiru said: “The latest data confirms there was a modest rally in monthly UK GDP growth in May as restrictions started to ease. However, coming after unprecedented contractions in the previous two months, it does little to alter the UK’S historically downbeat growth trajectory.” Mr Thiru said that while the economy could grow in the short term, “this may dissipate as the economic scarring caused by the pandemic starts to bite, particularly as government support winds down”.
Labour’s shadow chancellor Anneliese Dodds said the Government had to do “much more” to stop rising unemployment.
She said: “While it is encouraging to see that the economy started to slowly grow back in May, these figures show the scale of the challenge ahead of us.
“Labour pushed the Government to do more protect and create jobs. While we have concerns around the implementation of the Kickstart scheme, we are pleased to have seen some action in this area. But ministers must do much more to prevent people becoming unemployed in the first place, such as a flexible Job Retention Scheme for badly-hit sectors and areas affected by additional lockdowns.
“Above all, the Government must focus on getting the test, track and isolate system working properly, which is vital to help build consumer confidence.”
The economy was still just three-quarters of the size it was as recently as February
The Resolution Foundation thinktank said the figures showed how much damage had been caused by lockdown, and stressed that the economy is not likely to return to the same level as before Covid-19 until a vaccine is developed.
James Smith, research director of the Resolution Foundation, said:“the data tells us that the UK economy started to recover as lockdown restrictions were eased in May.
“But what would normally be seen as strong growth in May of 1.8% mainly reflects the depth of the lockdown’s economic damage, rather than a swift or V-shaped recovery. The economy was still just three-quarters of the size it was as recently as February.
“While we should expect strong immediate bounce backs in many sectors, such as retail which grew by 12% in May, what recovery we actually see from here will depend on how people respond to the easing of restrictions and, crucially, the course of the public health crisis. Ultimately, the UK economy is unlikely to return to close to its pre-covid economic path until a vaccine or treatment is found.”