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UK: Surge in the economy with ease in restrictions

According to official figures, with most businesses emerging from lockdown, the UK economy has grown by 4.8% between April and June.

UKK economy rebounds
UKK economy rebounds

Data from the Office for National Statistics reflected that retail, restaurants, and hotels propelled the gross domestic product (GDP) enlargement. Another factor for the boost has been as schools reopened in the second quarter.

Nonetheless, the figure was slightly lower than 5%, as the Bank of England expected. The UK economy is now 4.4% lesser than it was before the pandemic.

The rise in the second quarter contrasts with the first three months of the year when the economy contracted by 1.6% while Covid limitations were still in place.

Chancellor Rishi Sunak shared with the BBC, “Today’s figures show that the economy is recovering very strongly, exceeding many people’s expectations. But I’m not complacent. The economy and our public finances have experienced a significant shock. It is going to take us time to fully recover from that.”

Capital Economics mentioned it is likely that the economy returns pre-Covid levels later this year. “We are comfortable with our view that monthly GDP will return to its February 2020 pre-pandemic size by October and that the economy may yet surprise most forecasters by emerging from the pandemic without much scarring,” mentioned senior UK economist Ruth Gregory.

In April, non-essential retailers revived, as well as gyms, hairdressers and outdoor dining. In May, pubs, restaurants and cafes were permitted to attend customers indoors, while theatres, galleries and cinemas were allowed to open their doors.

The main pushing factor behind the growth was consumer spending, which increased by 7.3% over the quarter. However, what happens next is undefined. The safety net that has secured livelihoods – the furlough scheme – terminates in October. Economists opine that there will be some job losses, although far fewer than presumed a year ago.

The government’s wage support scheme has maintained the UK economy. However, employers have had to make assistances to staff wages from July, and the arrangement is due to close by the end of September.

Capital Economics said it expected the economy to return to pre-Covid levels later this year.

“We are comfortable with our view that monthly GDP will return to its February 2020 pre-pandemic size by October and that the economy may yet surprise most forecasters by emerging from the pandemic without much scarring,” said senior UK economist Ruth Gregory.

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