Home Business UK economy grew by 1.8 percent in May after record drop as...

UK economy grew by 1.8 percent in May after record drop as recovery gets underway

Gross domestic product (GDP) rose by 1.8 percent in May after slumping by a record 20.3 percent in April, Britain’s first full month of lockdown. But figures from the Office for National Statistics (ONS) said GDP has still not recovered and remains a quarter below its pre-pandemic levels.

Over the three months to May, the economy shrank by 19.1 percent and compared with a year ago it is 24.0 percent smaller.

The ONS said the economy eked out growth as manufacturing and housebuilding showed signs of recovery after restrictions in place to fight the coronavirus began to be lifted in May.

Despite the month-on-month increase in GDP, output is still a long way from recovering from the record falls seen in March and April when Britain was in full lockdown – and was 24.5 percent lower compared with February before the crisis struck.

The UK economy grew by 1.8% in May (Image: GETTY )

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Reacting to today’s figures, Chancellor Rishi Sunak, said: “Today’s figures underline the scale of the challenge we face. I know people are worried about the security of their jobs and incomes.

That’s why I set out our Plan for Jobs last week, following the PM’s new deal for Britain, to protect, support and create jobs as we safely reopen our economy.

“Our clear plan invests up to £30 billion in significant and targeted support to put people’s livelihoods at the centre of our national renewal as we emerge through the other side of this crisis.”

May’s GDP growth is also fell far short of the 5 percent rise expected by most economists.

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Jonathan Athow, deputy national statistician at the ONS, said of the May economy figures: “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.

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“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.”

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The ONS said GDP plunged 19.1 percent in the three months to May.

May’s meagre bounce back comes after GDP contracted at a record-breaking pace in March and April when the economy was brought to a virtual standstill, falling by a downwardly revised 6.9 percent and 20.3 percent respectively.

The data showed the all-important services sector grew by 0.9 percent in May, while manufacturing rose 8.4 percent and construction by 8.2 percent as factories and building sites started to get back on stream.

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But the three-month figures reveal the toll taken over the height of the lockdown, with output in the services sector – which accounts for three quarters of UK GDP – still 24.4 percent below February levels seen before the pandemic, with much of the retail sector still mothballed in May.

Non-essential shops were only allowed to reopen in mid-June across England, while pubs and restaurants remained shut until early July.

The figures also showed manufacturing activity in May was 22.3 percent lower than in February and construction a mammoth 38.8 percent behind.

Experts believe June and July’s GDP data should show a bigger bounce back.

But Samuel Tombs at Pantheon Macroeconomics cautioned: “More recent data suggest that the reopening of the consumer services sector in July has got off to a sluggish start, with customers at restaurants, pubs and cinemas small fractions of pre-COVID levels.

“With surveys showing that households remain very fearful of contracting the virus, social distancing rules likely to limit the consumption of services until the population is vaccinated and employers set to lay off many furloughed workers in the autumn, we think that GDP still will be about 5 percent below its pre-COVID level by the end of this year.”

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