The U.K. has one of the largest economies not only in Europe but around the world. However, even before the coronavirus pandemic, the economy was struggling to cope with problems related to Brexit. It is worth mentioning that, U.K’s economy grew 2.1% in August on a monthly basis. Hopefully, the country’s gradual recovery from the coronavirus crisis continues as can be seen from this result, albeit at a slightly slower pace.
Unfortunately, August’s estimated growth in the gross domestic product (GDP) failed to meet expectations. Interestingly, economists expected that GDP would grow by 4.6%. People should take into account that, in July GDP expanded by 6.4%. Moreover, during the first month of summer GDP grew 9.1%. Also, the country’s GDP increased by 2.7% in May.
Based on the information provided by the Office for National Statistics, in April GDP fell 19.5%. This fact once more underlines the severity of the problem and how pandemic affected the economy. Moreover, August’s GDP remained 9.2% lower than in February, before the full impact of the pandemic affected the economy. According to the Office for National Statistics, GDP grew 8% in the three months, as authorities started to remove restrictions.
Let’s have a look at the U.K.’s dominant services sector. It is worth noting that, the services sector grew by 2.4% in August. In July, the services sector reached better results, as the sector grew by 5.9%. The sector benefited from almost 70% growth in the food and beverage services industry. The Office for National Statistics attributed to easing of restrictions as well as the government’s “Eat Out to Help Out” scheme.
Local economy and risk factors
The country’s emergence from lockdown in recent months helped to boost the recovery in many sectors of the economy. However, the coronavirus pandemic is far from being over as the number of new coronavirus cases continues to rise in the country. Moreover, the second wave of infections appears to be underway.
The British government made the decision to impose a 10 p.m. curfew for bars and restaurants across the U.K. Moreover, in the coming weeks, the government may introduce other restrictions as well.
Several weeks ago, Rishi Sunak who serves as the U.K.’s Finance Minister announced a new emergency package of measures. This way the government wants to contain unemployment, replacing the country’s furlough scheme. As a reminder, the furlough scheme is due to expire this month.
A slow recovery is likely to influence the Bank of England when it comes to increasing its bond-buying program. As a reminder, since the onset of the pandemic, the central bank reduced its main lending rata twice from 0.75% to 0.1%. Moreover, the central bank deployed a $946.6 billion asset purchase program, as the bank wanted to boost the economy.
As stated above, the state of the local economy is far from being ideal. Hopefully, the government is working hard to get the economy back on track. However, it won’t be easy to achieve this goal in a short period of time. Moreover, the government should work with various companies to support the economy.
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