UK Businesses find ways to increase growth even in lockdown

British business

Britain’s economy grew in February as businesses coped better with lockdown restrictions, official figures show.

Gross domestic product (GDP) rose by 0.4 per cent after a 2.2 per cent decline in January, revised upwards from a 2.9 per cent fall, the Office for National Statistics said. The figure was broadly in line with forecasts.

The latest figures suggest that the economy is becoming resilient to lockdown as businesses adapt their operating models and consumers find new ways to spend. In April 2020, during the first lockdown, the economy contracted by almost 20 per cent.

Even the hardest hit sectors, such as accommodation and food services, eked out some growth and expanded by 2.6 per cent during the month, while the wholesale and retail sector grew by 3.3 per cent. These rises were partly offset by falls in information and communications and health output.

Business surveys have picked up on signs that economic activity is starting to rise. The closely watched purchasing managers’ index surveys for March revealed a surge in activity as services, manufacturing and construction companies prepared for easing of lockdown.

Thomas Pugh, an economist at Capital Economics, said: “Given there was no change in the lockdown restrictions in February, GDP was never going to shoot back up. But the small rise does suggest that January was probably the low point of the year. We think that vaccinations and the reopening of the economy will combine to trigger a rapid rebound in activity over the next few months.” He said that the economy will have recovered to its pre-pandemic size by early next year.

In its latest forecasts, the International Monetary Fund said that the economy would grow by 5.3 per cent this year and 5.1 per cent in 2022, the fastest growth since 1988 and an upgrade since January of 0.8 and 0.1 percentage points respectively.

Economists are expecting a sharp rebound from last year, when Britain’s economy shrank by 9.8 per cent, its biggest slump in more than three centuries and a more severe fall than in most European economies. However, the success of the vaccination programme means that the UK’s economic recovery should be stronger than the eurozone’s this year.

Samuel Tombs, an economist at Pantheon Macroeconomics, said: “We think that GDP rose by about 2 per cent month-to-month in March, helping to limit the quarter-on-quarter drop in [January to March] to 1.5 per cent.”