Arab Times

But risks loom

UK con­tin­ued its re­cov­ery in July

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LON­DON, Sept 12, (AP): The Bri­tish econ­omy re­couped fur­ther lost ground dur­ing July af­ter a swath of coron­avirus re­stric­tions on busi­nesses were lifted, of­fi­cial fig­ures showed Fri­day. How­ever, it still has to make up around half the out­put lost at the peak of the lock­down and now faces re­newed risks re­lated to Brexit.

The Of­fice for Na­tional Statis­tics said the Bri­tish econ­omy grew by a monthly rate of 6.6% as many sec­tors started re­open­ing af­ter months of be­ing idle dur­ing the lock­down. The hos­pi­tal­ity sec­tor, which in­cludes, ho­tels, pubs and restau­rants, re­opened at the start of July, for ex­am­ple.

Other sec­tors, such as man­u­fac­tur­ing and house-build­ing also con­tin­ued their re­cov­ery, though in­dus­trial pro­duc­tion and con­struc­tion remain be­low their pre-cri­sis lev­els.

July’s in­crease means that the Bri­tish econ­omy has now grown for three months in a row in the wake of April’s dra­matic 20% slide. Over­all, the Bri­tish econ­omy re­mains 11.7% smaller than it was in Fe­bru­ary be­fore the full eco­nomic im­pact of the pan­demic was felt.

Economists think the pace of the re­cov­ery will mod­er­ate fol­low­ing of a re­cent pick-up in new virus in­fec­tions that has seen the re-im­po­si­tion of lock­down re­stric­tions on so­cial gath­er­ings, for ex­am­ple.

The loom­ing end of a salary-sup­port scheme and height­ened un­cer­tain­ties over a trade deal be­tween the U.K. and the Euro­pean Union are also ex­pected to weigh on growth and, as a re­sult, most economists think the econ­omy will end the year around 8% smaller than it was be­fore the pan­demic.

“We’re likely to see the pace of ex­pan­sion slow in Au­gust and Septem­ber and stall as we head into the win­ter as the ‘me­chan­i­cal re­bound’ ends and un­em­ploy­ment rises,” said James Smith, de­vel­oped mar­kets econ­o­mist at ING.

Con­cerns over a post-Brexit deal have be­come a par­tic­u­lar con­cern over the past few days amid a sour­ing in re­la­tions be­tween the U.K. and the EU.

The an­nounce­ment from the Bri­tish gov­ern­ment that new leg­is­la­tion breaches el­e­ments of the with­drawal agree­ment, which al­lowed for the coun­try’s smooth de­par­ture from the bloc at the start of the year, has prompted a fu­ri­ous re­ac­tion from the EU and raised the prospect of an im­mi­nent col­lapse in the talks.

Even be­fore the cur­rent stand­off, the trade dis­cus­sions had made very lit­tle progress, with the two sides seem­ingly wide apart on sev­eral is­sues, no­tably on busi­ness reg­u­la­tions, the ex­tent to which the U.K. can sup­port cer­tain in­dus­tries and over the EU fish­ing fleet’s ac­cess to Bri­tish wa­ters.

The EU has been par­tic­u­larly in­sis­tent on en­sur­ing that Bri­tish-based busi­nesses don’t have an un­fair ad­van­tage as a re­sult of laxer so­cial, en­vi­ron­men­tal or sub­sidy rules in the U.K.

Bri­tish busi­nesses are wor­ried about a col­lapse in the talks that could see tar­iffs and other im­ped­i­ments slapped on trade with the EU at the start of next year.

Most economists think that the costs of a “no-deal” out­come would fall dis­pro­por­tion­ately on the UK, as trade with EU ac­counts for around half the to­tal.

Sup­port­ers of Brexit have said that one of the ben­e­fits of un­shack­ling the Bri­tish econ­omy from the EU is that it al­lows the coun­try to sign trade deals with who­ever it wishes - the EU ne­go­ti­ates trade deals on be­half of all its mem­bers.

On Fri­day, the Bri­tish gov­ern­ment said it had se­cured a free trade agree­ment in prin­ci­ple with Ja­pan, its first ma­jor deal as an in­de­pen­dent trad­ing na­tion.

Though de­tails of the agree­ment are thin, the gov­ern­ment said the UK-Ja­pan Com­pre­hen­sive Eco­nomic Part­ner­ship Agree­ment “goes far be­yond” the ex­ist­ing deal be­tween the EU and Ja­pan and will in­crease com­merce with Ja­pan by around 15 bil­lion pounds ($19 bil­lion).

Skep­tics say no amount of trade deals can mit­i­gate for the losses that may ac­crue in the event of a ‘nodeal’ out­come with the EU.

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