Recent figures from the Office of National Statistics (ONS) indicate that the UK has managed to bounce back from its recent recession, showing an increase of 15.5% from July to September.
While a sign of certain improvement, analysts worry that this growth is not enough to soften the blow that the coronavirus pandemic has had on the country over the past year.
The economy is still 8.2% smaller than what it was during pre-pandemic levels, and its rate of recovery has slowed to 1.1%. This is much weaker than the rate of growth observed in previous months. What’s more, analysts expect that the economy will likely shrink again towards the end of the year, due to the renewed nationwide lockdown.
The surge is a welcome change to the recession that has been plaguing the country, September marking the fifth consecutive month of economic expansion. The improvement in output was observed across most sections of the economy, including manufacturing, construction and services. Other sectors like education, housebuilding, law and accounting industries also showed marked improvement.
However, hospitality and travel continue to suffer because of the closure of pubs and restaurants. The unemployment rate continues to climb, with September registering the largest increase since May 2009 in the number of people who are out of work.
Experts believe that the economic growth indicates a short-term rebound, rather than any sustained recovery. The figures reflect various policy-led successes over the past few months, including the impact of the Eat Out to Help Out scheme, students’ return to schools, and a slowing in the number of new COVID cases.
However, the coming months are likely to test the UK's resilience further, as the impact of tighter lockdown restrictions combined with the increasing number of cases takes a further toll.
Samuel Tombs, chief economist at Pantheon Macroeconomics, predicted that the economy would shrink by around 0.5% in the final three months of the year, adding, “On a monthly basis, it probably won't recover to September's level until the spring, when it should be possible for Covid-19 restrictions to be sustainably relaxed.”
New COVID vaccine paves the way for economic recovery
Hope glimmers on the horizon in the form of the recently announced COVID vaccine from Pfizer, which has been performing well in clinical trials. News of the vaccine is likely to provide a further economic boost by reducing the level of uncertainty around when businesses will be able to fully resume operations in the coming months.
As Thomas Pugh, economist at Capital Economics, sums up with cautious optimism, "We already know that GDP will struggle to rise in October as tighter restrictions were imposed and that it will take a hammering in November as the effects of the second Covid-19 lockdown are felt. But the recent news of a potentially effective vaccine means that the outlook beyond the next six months could be much rosier than we have previously anticipated."
News of a forthcoming vaccine, combined with the various measures implemented by the Bank of England and the Treasury to boost the economy, may be what it takes to survive until lockdown restrictions are lifted in December. As of now, the government remains confident that the measures currently in place will allow the country to exit its second lockdown on schedule, allowing the economy to continue on its slow trajectory towards normal levels.