Latest figures released by the Office for National Statistics (ONS) show the UK economy in May grew by just 1.8% as a gradual easing of the lockdown restrictions were introduced allowing businesses to return to work if it was safe to do so.
The easing had a smaller impact than expected, with experts expecting a sharper upturn in GDP.
The increase came after a fall of 6.9% in March and 20.4% in April in the height of lockdown restrictions. As a result of the Coronavirus crisis the UK economy is now 24.5% smaller than it was in February. The bigger picture of recovery may become clearer when the ONS release the stats for June, when further restrictions were lifted and non-essential businesses were allowed to re-open. We will have a clearer picture of the path to recovery when this data is available and this will show how far businesses have to go and will also show any further support they may need.
Customer confidence will be one of the main keys to economic recovery, if customers do not feel safe going out and shopping at the same level as previously, the economy will not see a V-shape turnaround that many are hoping for. The support measures announced by the Chancellor in his summer statement are welcome however, the government may need to be prepared to implement more significant fiscal stimulus in order to recover customer confidence and kick start a sustained recovery, similar to the ‘eat out to help out’ scheme introduced in the summer statement.
Businesses would also benefit from support in a reduction of the overall cost of employment including a cut in employer national insurance contributions and other measures and incentives in order to protect and create jobs.
Commenting on GDP figures for May 2020 published today by the ONS, BCC Head of Economics Suren Thiru said:
“The latest data confirms there was a modest rally in monthly UK GDP growth in May as restrictions started to ease. However, coming after unprecedented contractions in the previous two months, it does little to alter the UK’s historically downbeat growth trajectory.
“The pick-up in output in May is more likely to reflect the partial release of pent-up demand as restrictions began to loosen, rather than evidence of a genuine recovery. While UK economic output may grow further in the short term as restrictions ease, this may dissipate as the economic scarring caused by the pandemic starts to bite, particularly as government support winds down.
“Although some of the individual measures announced in the Summer Statement were welcome, more significant fiscal stimulus is likely to be needed to help kickstart a sustained recovery.”
For further information on the guidance and support available to your business please visit our Coronavirus Business Support Hub.