EconomyOct 9 2020

Economy grows 2.1% in August as recovery slows

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Economy grows 2.1% in August as recovery slows

The UK economy grew for the fourth consecutive month in August, with help from the government’s Eat Out to Help Out scheme, but this growth is not expected to last as more restrictions are introduced.

Figures from the Office for National Statistics, published today (October 9), showed gross domestic product (GDP) grew by 2.1 per cent in August 2020 as lockdown measures continued to ease. 

This is the fourth consecutive monthly increase following a record fall of 19.5 per cent in April 2020.

However, it still remains 9.2 per cent below the levels seen in February 2020, before the full impact of the coronavirus pandemic took effect.

According to the ONS, August’s rise was driven by the accommodation and food services industry as both the easing of lockdown restrictions and the Eat Out to Help Out Scheme boosted demand for bars and restaurants.

In addition, the accommodation industry grew by 76 per cent as restrictions on holidaying abroad boosted staycations. 

However, this uptick is not expected to continue as temporary restrictions have again been placed on bars and restaurants after the spread of coronavirus began to increase.

Richard Pearson, director at investment platform, EQi, said the country was not out of the “ Covid-quagmire” just yet.

He said: “Today’s figures are not quite the dramatic uptick we saw in July, but on face-value the fabled ‘V-shaped’ recovery continues.

“However, this growth is likely to be reversed in the next quarter with temporary hospitality closures sweeping across Scotland and many parts of England due to rising Covid-19 cases, naturally resulting in waves of redundancies."

He added: “With the threat of local lockdowns looming over consumers’ heads and hospitality redundancies on the horizon, consumers aren’t going to dance the night away in the coming months. 

“It’s likely that as we head into the next month spending will fall despite entering the busiest shopping season, and retail investors will once again return to the saving habits we witnessed during the initial lockdown.”

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