Britain’s economy rebounded less than expected in May, growing only 1.8% over the prior month, suggesting that the relaxation of the national lockdown did not have a strong impact.
The manufacturing and construction sectors showed the best performance, each growing by more than 8% during the month.
The Office for National Statistics, or ONS, which said the economy remained “in the doldrums,” warned that the U.K. economy is now 24.5% smaller than it was in February, just prior to the emergence of the pandemic.
The British economy’s modest gain in May, followed a historic 20.4% decline in April.
For the three-month period ending in May, the U.K. economy contracted by 19.1% over the prior three-month period.
(During the 2008-2009 recession, the British economy never contracted by more than 2.1% in any single quarter, the ONS indicated)
“The economy was still a quarter smaller in May than in February, before the full effects of the pandemic struck,” said Jonathan Athow, deputy national statistician for economic statistics at the ONS. “In the important services sector, we saw some pick-up in retail, which saw record online sales. However, with lockdown restrictions remaining in place, many other services remained in the doldrums, with a number of areas seeing further declines.”
Athow told BBC he expected the economy to have shown gradual improvement in June.
“Some of the survey data we’re seeing suggests that as more of the economy reopened and as some of the restrictions were eased, we did see stronger performance in June, but it’s really [too]early [to tell],” he said. “You’ve got one month of firm data and some indicators suggesting June might be stronger, but there’s a long road to go here and we’re still trying to figure out what the best data is to understand the overall picture.”
The May data raised concerns among politicians and economists.
“Today’s figures underline the scale of the challenge we face,” said Chancellor of the Exchequer Rishi Sunak. “I know people are worried about the security of their jobs and incomes. That’s why I set out our ‘Plan for Jobs’ last week, following [Prime Minister Boris Johnson’s] new deal for Britain, to protect, support and create jobs as we safely reopen our economy. Our clear plan invests up to £30 billion [$37.6 billion] in significant and targeted support to put people’s livelihoods at the center of our national renewal as we emerge through the other side of this crisis.”
The British Chambers of Commerce, or BCC, cautioned that May’s “modest rally” in economic growth did not prevent the U.K.’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,” said the BCC’s head of economics, Suren Thiru. “While U.K. 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.”
Robert Alster, head of investment services at Close Brothers Asset Management in London, called the May figures “undoubtedly worrying” and that they suggested “choppy waters ahead.”
“Jobs, both on the high street and in industry, are disappearing at an alarming rate and there are no signs yet of any real improvement in the U.K. labor market,” he said.
Thomas Pugh, U.K. economist at Capital Economics, called the May numbers “a disappointing first step on the road to recovery” and noted that “hopes of a rapid rebound from the lockdown are wide of the mark.”
“Indeed, the path to full economic recovery will probably be much longer than most people anticipate,” Pugh added.
Dharshini David, BBC’s global trade correspondent, commented: “May’s figures show even firms who are back in business may be struggling to get on track. It’s one thing being allowed to open the doors again (and some firms remain mothballed); another to be confident you can do so safely. And then there’s the biggest hurdle of all, ensuring customers are willing and able to spend again.”
David added: “As job losses mount, it’s clear that even some firms who qualify for government help are faltering. Some won’t have made it as far… History tells us that economies can take years to make up lost ground after a slump. The blow from this crisis was felt within days, convalescence may be tougher. And in the meantime, the livelihoods of many may feel the strain.”