Economy returns to growth despite Covid-19

13th April 2021 18:26

Marc Shoffman from interactive investor

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Manufacturing and construction boost the figures, but GDP still down on pre-pandemic levels.

The UK economy grew by 0.4% in February, as manufacturing and construction activity kept the country going despite being in lockdown.

Gross domestic product (GDP) estimates from the Office for National Statistics (ONS) suggest a turnaround from the start of the year, when output fell 2.2%. Reasons include the continuing coronavirus pandemic, national lockdowns and a Brexit drag on the economy.

January’s performance figure was revised from a 2.9% decline previously.

Output in the production sector grew by 1% in February 2021, as manufacturing rose 1.3% following a decline in January, according to the ONS.

Construction sector activity rose 1.6%, driven by growth in both new work and repair and maintenance.

Overall, the ONS says GDP is still 7.8% below the pre-pandemic levels seen in February 2020 and 3.1% below the initial recovery peak in October 2020.

Derrick Dunne, chief executive at Beaufort Investment, says the pre-pandemic comparisons show how far the economy still has to go on the road to recovery.

He adds: “The key figure is that the UK economy still remains some 7.8% below the growth rate from a year ago, a significant chasm which will take time to overcome.

“However, on the upside, January's data was revised upwards, which is positive and which means we may have a chance of achieving pre-pandemic growth rates by the end of 2021, as predicted by the Bank of England.”

There is more cautious hope now compared with in previous months after the latest lockdown restrictions were eased to allow non-essential shops and pub gardens to reopen.

Suren Thiru, head of economics for the British Chambers of Commerce, says: “The clarity provided by February’s announcement of a roadmap for reopening helped support output in the month.

“The release of pent-up demand following the easing of restrictions and the strong vaccine roll-out will boost activity.

“However, hope of a sustained consumer-led revival may prove too optimistic as the economic scarring caused by Covid-19 may trigger a renewed reluctance to spend as government support winds down.”

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