Eat Out to Help Out boosts slowing economic recovery

London lockdown

Britain’s economic recovery lost momentum in August despite a big boost from the government’s Eat Out to Help Out Scheme, official figures suggest.

GDP expanded by 2.1 per cent in August, according to the Office for National Statistics. This was down from 6.4 per cent in July and 9.1 per cent in June. Economists were expecting growth of 4.6 per cent.

Although the economy has recovered much lost ground, output is still 9.2 per cent lower than it was before the pandemic hit. Growth rebounded strongly over the summer as restrictions were relaxed but hopes of a rapid V-shaped recovery have since diminished. A resurgence in cases and rising unemployment is most likely to cause growth to flatline in the final quarter of the year.

Rishi Sunak, the chancellor, said: “Today’s figures show our economy has grown for four consecutive months, but I know that many people are worried about the coming winter months. Throughout this crisis, my single-focus has been jobs — protecting as many jobs as possible, and providing support for people to find other opportunities where this isn’t possible. This goal remains unchanged.”

Last month the Treasury announced a new job support scheme to top up the wages of workers on reduced hours. However, economists warned that it would not be enough to stem the tide of rising unemployment when the more generous job retention scheme comes to an end this month.

Ruth Gregory, senior UK economist at Capital Economics, said: “With the government’s fiscal support unwinding, the next few months will almost certainly be worse. We expect the new Covid-19 restrictions to mean that the economy does little more than move sideways in the final three months of the year, leaving economic activity marooned 7.5 per cent short of its pre-crisis level. So while the economy has recouped 64 per cent of the fall in GDP in four months, it may take until late 2022 to get back the remaining 36 per cent.”

Growth in August was led by the services sector, which expanded by 2.4 per cent in August but failed to live up to analysts’ forecasts of 5 per cent. The accommodation and food services subsector was the largest contributor to this growth, expanding by 71.4 per cent, thanks to a big boost from the government’s Eat Out to Help Out scheme.

Rising demand for staycations also fuelled growth in the sector as international travel restrictions forced holidaymakers to forgo trips abroad. Together, the food and accommodation industries contributed to more than half of the 2.1 per cent growth registered in August. The broader services sector continued to struggle, however. Of the fourteen services subsectors, 12 remain below their pre-crisis level.

Output in the construction sector rose by 3 per cent in August, leaving it 10.8 per cent below its pre-crisis peak. Manufacturers had even more difficulty, registering growth of only 0.7 per cent. Output in the sector is still 8.5 per cent below its pre-crisis peak.

Jonathan Athow, deputy national statistician for economic statistics at the ONS, said: “The economy continued to recover in August but by less than in recent months. There was strong growth in restaurants and accommodation due to the easing of lockdown rules, the Eat Out to Help Out scheme and people choosing summer staycations. However, many other parts of the service sector recorded muted growth.”