UK economy recovery from coronavirus continues as it grew 6.6% in July
THE UK economy grew by 6.6% in July as it continues to recover from the coronavirus crisis. It is the third month in a row that GDP has risen, according to figures by the Office for National Statistics (ONS). Hairdressers, pubs and restaurants contributed to growth after they were allowed to reopen in July, showing […]
THE UK economy grew by 6.6% in July as it continues to recover from the coronavirus crisis.
It is the third month in a row that GDP has risen, according to figures by the Office for National Statistics (ONS).
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Hairdressers, pubs and restaurants contributed to growth after they were allowed to reopen in July, showing a V-shaped economic recovery.
Yet GDP growth has slowed compared to June’s increase of 8.7%, and the economy still remain 11.7% below pre-virus levels.
The ONS noted that the UK “has still only recovered just over half of the lost output caused by the coronavirus”.
Analysts had predicted a 6.8% month-to-month increase ahead of today’s announcement.
What this means for your personal finances
GROSS domestic product (GDP) is one of the main indicators used to measure the performance of a country's economy.
When GDP goes up, the economy is generally thought to be doing well although today’s figures aren’t as strong as hoped.
Negative growth often brings with it falling incomes, job cuts and lower consumption.
The Bank of England (BoE) uses GDP as one of the key indicators when it sets the base interest rate.
This decides how much it will charge banks to lend them money, and is a way to try to control inflation and the economy.
So, for example, if prices are rising too fast, the BoE could increase that rate to try to slow the economy down. But it might hold off if GDP growth is slow.
The BoE cut interest rates twice in March due to coronavirus.
Base rate cuts means mortgage borrowers now typically benefit from lower rates, but at the other end of the scale savers earn less on their savings.
To measure GDP, the Office for National Statistics (ONS) collects data from thousands of UK companies.
Andrew Wishart, UK economist at Capital Economics, told The Sun the full impact of the crisis on jobs and businesses will only become apparent once the government starts to withdraw its support.
The research firm expects unemployment to double from 4 per cent to 8 per cent, with the same number of companies likely to go bust.
The figures come after the UK plunged into its worst ever recession last month, following a quarterly GDP drop of 20.4%.
It was the first time in 11 years that the UK tipped into a recession.
Economists consider two consecutive three-month periods where GDP falls as the technical definition of a recession.
Although GDP rose month-on-month in July, the UK is still in a recession given GDP fell by 7.6% in the three months to July.
UK unemployment has so far risen by 730,000 workers since March after another 114,000 Brits lost their jobs in July.
Around 220,000 workers lost their jobs in the quarter between April and June, which is the largest quarterly drop since 2009.
In July, the Office for Budget Responsibility (OBR) predicted unemployment could treble this year to 3million, up from 1.3million in 2019.
The OBR said the true number of job losses depends on what companies do when the furlough scheme ends in October.
How to recession proof your finances
IF you're worried about the recession hitting your finances then we explain how to protect yourself.
CHECK YOUR FINANCES Take a look at where you can cut costs. Are there any subscriptions you could cancel? Could you haggle down a bill? Reassess your finances and work out where to save cash and then save this money into a rainy day fund.
PAY OFF YOUR DEBTS Make sure you’re repaying priority debts and if you’re struggling speak to your lender. Use a tool such as MoneySavingExpert.com’s eligibility checkers to check which cards and loans you’re likely to be accepted for without it hurting your credit score. You can get FREE debt advice from places like Citizens Advice and StepChange.
DIVERSIFY YOUR PENSIONS AND INVESTMENTS If you’ve got a pension or investments make sure your pots are well diversified. Being overexposed to one asset class or one particular company could put your savings at risk if something goes wrong.
Experts are hoping for a V-shaped economic recovery, but these hopes initially faded in July as the UK economy grew just 2.4 per cent in May.
Meanwhile, mortgage approvals surged in July following lockdown, showing a V-shaped recovery for the housing market.
Darren Morgan, ONS director of economic statistics, said: “While it has continued steadily on the path towards recovery, the UK economy still has to make up nearly half of the GDP lost since the start of the pandemic.
“Education grew strongly as some children returned to school, while pubs, campsites and hairdressers all saw notable improvements.
“Car sales exceeded pre-crisis levels for the first time, with showrooms having a particularly busy time.
“All areas of manufacturing, particularly distillers and car-makers, saw improvements, while house-building also continued to recover.”
James Smith, research director at the Resolution Foundation think tank, said: “The UK economy continued to rebound over the summer as lockdown restrictions eased.
“But it’s the level of activity that matters, which remains hugely down on pre-pandemic levels.
“More worryingly, the rise in Covid cases and return of public health restrictions means we are coming towards the end of the easy economic wins from restarting activity.
“With emergency support to firms and workers being withdrawn, far tougher times lie ahead this autumn.”
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Suren Thiru, head of economics at the British Chambers of Commerce (BCC), said the economy is currently in “a period of temporary calm”.
He added: “However, with many firms continuing to face an unprecedented cash crisis and unemployment likely to surge as the support schemes wind down, there remains little prospect of a sustained resurgence unless substantial action is taken.
“To protect jobs and livelihoods, the government should consider extending and adapting the coronavirus business interruption loan scheme to ensure businesses are supported sustainably over a longer period.”