Britain’s economy posts record growth but awaits setback from lockdown

Britain’s economy bounced back from recession in the third quarter of the year with record growth of 15.5 per cent, according to official data, leaving the economy 9.7 per cent smaller than before Covid-19 struck.

The UK’s return to growth in the three months ended September 30 came as movement restrictions eased following the first lockdown. Analysts warned that the economy is likely to shrink again in the fourth quarter of the year because of the effects of a second shutdown.

“Today’s figures show that our economy was recovering over the summer, but started to slow going into autumn,” said Rishi Sunak, the UK’s finance minister. “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.”

The record-breaking rise in growth in the third quarter follows a record-breaking fall in GDP of 19.8 per cent in the previous three months, according to the Office for National Statistics. However, growth of only 1.1 per cent in September shows that the recovery was “rapidly running out of steam at the end of the third quarter even before tighter restrictions and the second lockdown were imposed”, said Thomas Pugh, UK economist at Capital Economics.

The level of GDP is also 9.7 per cent below where it was before the pandemic at the end of 2019. Compared with the same quarter a year ago, the UK economy fell 9.6 per cent.

“On the expenditure side, the rebound in Q3 was driven by consumer spending, which rose by 18.3 per cent quarter-on-quarter,” Mr Pugh said.

“However, business investment remained subdued, only rising by 8.8 per cent quarter-on-quarter. And after making a rapid start, at the end of Q3 the recovery seemed to have largely burned itself out with that 1.1 per cent monthon-month rise in September leaving the economy still 8.2 per cent smaller than it was in February.”

Growth in the services sector was only 1 per cent up in September compared to August, largely thanks to strong growth in education output as schools started again.