The UK economy grew 2.3% in April as pubs and restaurants reopened and the vaccine drive continued at pace

COVENT GARDEN, LONDON, UNITED KINGDOM - 2021/06/07: A couple clinking beers at an outdoor area set up for drinking at the Covent Garden, London. As the UK government lifted the restrictions imposed on dining services in relation to COVID, crowds of people flooded restaurants, bars and pubs across central London over the weekend to grab a drink. Restaurants are doing their best to ensure a hygiene within their premises, and are still adopting measures to maintain a safe dining distance between tables. People are seen to be very excited about the re-opening in London. (Photo by Belinda Jiao/SOPA Images/LightRocket via Getty Images)
The English government allowed pubs and restaurants to reopen in May.

The UK economy grew 2.3% in April, figures showed on Friday, as restrictions were relaxed and pubs and restaurants in England were allowed to serve people outside.

April’s 2.3% growth in gross domestic product was the strongest since July 2020, when the economy rebounded from the first coronavirus lockdowns, although it was marginally below economists’ estimates of a 2.5% expansion.

The service sector grew a strong 3.4% in April, aided by the easing of lockdowns in the middle of the month, the Office for National Statistics said.

The pound slipped slightly after the figures were released, but was roughly flat against the dollar at $1.418.

“Strong growth in retail spending, increased car and caravan purchases, schools being open for the full month and the beginning of the reopening of hospitality all boosted the economy in April,” Jonathan Athow, deputy national statistician at the ONS, said.

Chancellor Rishi Sunak said the UK GDP figures were “a promising sign that our economy is beginning to recover.”

Despite the strong growth, UK GDP remained 3.7% smaller than in February 2020, before COVID-19 struck, according to the ONS.

Another factor boosting the UK economy has been the rapid national rollout of coronavirus vaccines. Almost 60% of Britons have had their first dose, according to Our World In Data.

The vaccine drive has so far allowed the government to stick to its timetable for reopening the economy. However, the rise in the delta variant, first discovered in India, could postpone the lifting of all restrictions, which was due on June 21.

The government lifted more restrictions in England in May, allowing people to go inside pubs and restaurants, and reopening cinemas.

“Most indicators suggest that the recovery progressed at a solid pace in May, especially after more restrictions on services businesses were lifted on May 17,” Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said.

“For instance, the composite [purchasing managers’ index] increased in May to its highest level since records began in 1998, while data from the British Retail Consortium suggest that retail sales volumes rose a little further, despite already exceeding their 2019 average by 10% in April.”

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Bank of England boosts 2021 UK growth forecast to 7.25% in wake of successful vaccine rollout

The Bank of England kept interest rates on hold.

The Bank of England sharply upgraded its forecasts for the UK economy on Thursday, citing the successful rollout of coronavirus vaccines and a sharp drop in COVID cases.

Policymakers at the Bank kept interest rates at the record-low level of 0.1% and maintained the size of its bond-buying package, through which the BoE injects money into the economy, at £895 billion ($1.25 trillion).

The BoE predicted UK gross domestic product will grow 7.25% in 2021, considerably higher than its February estimate of 5% growth. UK GDP contracted 9.8% in 2020, the worst slump out of the G7 countries.

The Bank said the unemployment rate should now peak at just under 5.5% in the third quarter of 2021, down sharply from an earlier estimate of a 7.75% peak. And it said UK GDP should recover its pre-pandemic level towards the end of 2021, earlier than previously expected.

“New COVID cases in the United Kingdom have continued to fall, the vaccination programme is proceeding apace, and restrictions on economic activity are easing,” the bank said in its monetary policy statement.

The central bank’s monetary policy committee (MPC) said that while the overall size of its quantitative easing (QE) program would remain the same, the weekly pace of its purchases would slow somewhat.

Thomas Pugh, UK economist at consultancy Capital Economics, said this move was not due to the strength of the economy. “The MPC has always said that it aimed to finish the £150 billion of QE announced last November ‘around the end of 2021’, so the pace of asset purchases was always going to slow at some point,” he said.

The UK has achieved one of the fastest vaccine rollouts in the world, with 51% of the population having received at least one dose by May 4, according to Our World In Data. That compared to 63% in Israel and 44% in the US.

Business and consumer confidence has picked up, as coronavirus cases have fallen following strict lockdowns in January and February and the government has gradually reopened the economy.

On the topic of inflation, which has unnerved financial markets in recent months, the Bank said it expected a short-term spike followed by a fall. It said year-on-year inflation is expected to rise above the Bank’s 2% target towards the end of 2021 before returning to around 2% in the medium term.

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UK unemployment rate slips unexpectedly to 4.9% in February, but payroll numbers fall ahead of reopening

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Britain entered a tough new lockdown in January

The UK unemployment rate fell unexpectedly in the three months to the end of February, data showed on Tuesday, ahead of the country’s latest loosening of coronavirus restrictions.

But the number of employees on payrolls fell by 56,000 in March compared to February, painting a mixed picture about the UK jobs market.

Headline unemployment slipped to 4.9% from December to February from 5% in the previous quarter, the Office for National Statistics said.

It beat economists’ expectations of a rise to 5.1%, but analysts said the figure was flattered by a rise in people becoming economically inactive, meaning they had stopped looking for work.

Yet there were some signs of progress in hiring. The number of vacancies for jobs rose nearly 16% in March compared to February, according to experimental data.

The UK economy is gradually reopening from the tough restrictions that were in place from January to March. On April 12, pubs, non-essential stores and hairdressers were allowed to reopen as the vaccine drive picked up speed.

Britain’s government’s furlough scheme currently pays the wages of roughly one in five employees and has been a key reason that the country’s unemployment rate has stayed relatively low, rising only 0.9 percentage points in the year to February 2021.

“The slight fall in the unemployment rate… suggests that the government’s job furlough scheme is still insulating the labor market from the worst effects of the pandemic,” Thomas Pugh, UK economist at Capital Economics, said.

However, economists expect the UK unemployment rate to climb once the furlough scheme is wound down towards the end of the year.

James Smith, developed market economist at ING, said: “Like most economists, we expect the unemployment rate to rise this year.”

He added: “The end of the furlough scheme, and to a lesser extent, a potential increase in inbound UK migration later this year (partly reversing last year’s population fall) are both likely to trigger a temporary spike in the jobless rate to 6-6.5%.”

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The UK economy grew 0.4% in February – but analysts say a rapid vaccine rollout should now power speedy growth

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The UK has been fast at rolling out COVID-19 vaccines.

The UK economy grew 0.4% in February, data showed on Tuesday, starting what analysts expect to be a rapid rebound for the country from last year’s deep COVID-19 slump.

The growth was slightly below analysts’ expectations of 0.5% and followed an upwardly revised 2.2% fall in gross domestic product in January, when tough coronavirus restrictions were put back in place to try to tackle a surge in infections.

It left the country’s GDP 7.8% smaller than before coronavirus hit, according to the Office for National Statistics, following a 9.8% drop in 2020 – the worst performance in the G7.

Analysts expect the UK economy to bounce back rapidly in 2021, however. The government is expected to gradually lift restrictions after a series of lockdowns that battered businesses and household finances.

“GDP rising modestly in February despite restrictions after a surprisingly small contraction in January shows the UK economy is now being less affected by lockdowns than was originally the case,” said Howard Archer, chief economic advisor to the EY Item Club.

“Lessons have been learned in keeping economic activity going during lockdowns.”

Deutsche Bank senior economist Sanjay Raja said in a note on Monday he expects the UK economy to grow 6% in 2021.

“The UK recovery has begun,” he said. “We don’t expect to see another negative print for some time.”

Raja added: “The modest February unwind should give way to an even bigger jump in March, where we see activity ramping up even more as schools reopen and mobility trends up.”

Goldman Sachs reckons the UK’s rapid rollout of coronavirus vaccines should help the economy reopen and recover rapidly, spurring growth of 7.1% in 2021. That is well above the consensus estimate of around 5%.

The ONS said services – the powerhouse of the UK economy – grew just 0.2% in February, when the country was still under tough coronavirus restrictions. Manufacturing grew 1.3% and construction grew 1.6%, the ONS said.

The UK pound rose slightly against the dollar after the data was released, and traded around 0.12% higher at $1.375 on Tuesday morning.

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UK unemployment rate unexpectedly falls to 5% in January as the country looks ahead to reopening

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The UK is looking ahead to reopening thanks to a rapid vaccine rollout

  • The jobless rate dropped to 5% in the three months to January, from 5.1% in the three months to December.
  • Separate figures showed the number of people on payrolls picked up for the third month in a row.
  • The UK has suffered badly during COVID-19 but is looking to reopen thanks to a quick vaccine rollout.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

The UK unemployment rate fell unexpectedly to 5% in the three months to January, data showed on Tuesday, in an encouraging sign given the country’s plans to gradually lift its coronavirus restrictions.

Britain’s headline unemployment rate fell to 5% from 5.1% in the three months to December, the Office for National Statistics said, beating economists’ expectations of an increase to 5.2%.

Separate figures showed 68,000 more people joined payrolls in February than in January, the third monthly increase, although 693,000 fewer people were on payrolls compared to a year earlier.

“After yet another monthly increase, there were almost 200,000 more employees on payroll in February than three months earlier,” Sam Beckett, head of economic statistics at the ONS, said.

Beckett said that of the almost 700,000 people who have fallen off payrolls, almost two-thirds have been under 25, over half worked in the hospitality sector, and almost a third have been in London.

The UK has suffered over 130,000 deaths from coronavirus and one of the worst economic tolls in the world.

But its unemployment rate has been held down by the furlough wage subsidy scheme. And the country has rapidly rolled out COVID-19 vaccines, allowing it to plot its way out of restrictions by the summer.

Non-essential stores may reopen as soon as April 12 if the government feels cases are under control, with hospitality venues such as pubs potentially allowed to resume business and serve people outside. All restrictions may then be lifted as early as June 21.

“The continued success of the vaccine rollout provides us with hope for the future, and through our plan for jobs, we will continue to support people throughout the months to come,” UK chancellor Rishi Sunak said.

UK markets showed little reaction to the data. London’s FTSE 100 index was down 0.43% in early trading, while the pound was off by 0.4% against the dollar at $1.3806.

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The UK economy shrank a better-than-expected 2.9% in January – and analysts are predicting ‘swifter’ growth thanks to vaccines

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The UK economy faced tough new COVID-19 restrictions in January

The UK economy shrank 2.9% in January as tough coronavirus restrictions forced businesses to close, official figures showed Friday, although the contraction was smaller than the 4.9% fall economists expected.

It left the UK economy 9% smaller than before coronavirus struck in February 2020, the Office for National Statistics said. However, economists have predicted “swifter” growth, as coronavirus vaccines pave the way towards a resumption of more normal activity.

The contraction in January, when a national lockdown came into effect, followed growth of 1.2% in December. The UK suffered the worst slump in the G7 in 2020, with GDP shrinking 9.9% across the year.

ONS deputy national statistician Jona thn Athow said: “The economy took a notable hit in January… with retail, restaurants, schools and hairdressers all affected by the latest lockdown.”

However, Britain has been one of the fastest countries at rolling out coronavirus vaccines and hopes to gradually reopen the economy over the spring and summer.

The country’s government-spending watchdog expects growth of 4% in 2021, reflecting the first-quarter lockdown. But it then foresees growth of 7.3% in 2022.

The Office for Budget Responsibility said in March there would be “a swifter and more sustained economic recovery” than previously thought, “albeit from a more challenging starting point than we forecast in November.”

Unemployment is now expected to peak at 6.5%, down from an earlier estimate of 7.5%, reflecting the quicker rollout of vaccines and extra government support.

In January, sharp slowdowns in consumer-facing services and education drove a contraction of 3.5% in the UK’s dominant services sector. Manufacturing shrank 2.3%, its first fall since April 2020.

Paul Dales, chief UK economist at consultancy Capital Economics, said: “Overall, January’s lockdown left the economy in a fairly big hole.

“But the government’s easing roadmap has provided the ladder and the vaccinations are providing the willingness to climb out of it.”

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UK unemployment rate hits 4-year high in final quarter of 2020 but data shows ‘tentative’ signs of stabilizing

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The UK economy suffered the worst slump in the G7 in 2020

  • The UK unemployment rate rose to 5.1% in the fourth quarter of 2020, the highest since 2016.
  • Yet company payrolls rose in January, when the UK went into national lockdown, suggesting the jobs markets may be stabilizing.
  • The UK suffered the worst slump out of the G7 in 2020 and has seen more than 120,000 deaths.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

The UK unemployment rate hit 5.1% in the final quarter of 2020, its highest since 2016, as tough coronavirus restrictions caused companies to lay off workers, according to official data on Tuesday.

Yet the UK’s Office for National Statistics said there were some “tentative” signs of stabilizing, with separate data showing the number of employees on company payrolls rose by 83,000 in January from December.

The coronavirus pandemic has been particularly painful for the UK, which has suffered more than 120,000 deaths and the worst economic slump in the G7.

However, the UK has been one of the fastest at rolling out coronavirus vaccines. This allowed Prime Minister Boris Johnson to lay out a “roadmap” on Monday that could see the whole of the economy reopened by the summer.

The 5.1% unemployment rate in the final quarter of 2020 was up from 4.7% in the previous quarter and 3.8% a year earlier, the ONS said. It was the highest figure since early 2016.

It meant an estimated 1.74 million people were out of work in the period. That was 454,000 higher than a year earlier.

Yet ONS deputy national statistician Jonathan Athow said that the separate payroll figures “show tentative early signs of the labour market stabilizing, with a small increase in the numbers of employees paid through payroll over the last couple of months.”

Though he added that there are “still over 700,000 fewer people employed before the start of the coronavirus pandemic.”

The UK government’s job support scheme – known as furlough – has kept a lid on unemployment by paying the wages of workers who may otherwise have been laid off. It supported more than 9 million workers at its peak in 2020.

The Bank of England predicted earlier in February that unemployment would rise to close to 8% by the middle of 2021 after the scheme closes. However, chancellor Rishi Sunak is reportedly planning to extend the program in his March 3 Budget, which lays out the Treasury’s economic policies.

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The UK economy suffered the biggest slump in the G7 in 2020, shrinking a record 9.9% as COVID-19 hit hard

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UK GDP grew in Q4, but the country’s economy contracted sharply overall in 2020

The UK economy shrank by 9.9% in 2020 as the coronavirus pandemic battered the country, official Q4 GDP figures showed on Friday.

It was the worst contraction since records began and likely sharpest contraction overall in 300 years. It means the UK economy fared the worst out of the G7 group of rich democracies and among the worst overall.

The economy grew 1% in the final three months of the year, the country’s Office for National Statistics said, after dealing better than expected with a sharp tightening of restrictions in November. Britain’s gross domestic product had grown 16.1% in the third quarter.

But despite two consecutive quarters of growth, GDP remained 7.8% below its level in the fourth quarter of 2019.

Along with one of the worst economic downturns, the UK has one of the world’s highest coronavirus death rates, with more than 110,000 having so far died from COVID.

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Yet the UK has been one of the fastest countries in the world at rolling out coronavirus vaccines, after rapidly approving jabs from AstraZeneca/Oxford, Pfizer/BioNTech and Moderna.

The Bank of England cut its growth forecast for the UK economy in 2021 to 5% on February 4, saying the lockdown put in place in January would delay the recovery. It also expects Brexit to weigh on growth in the first quarter.

However, the Bank said that the recovery will be “rapid” when it comes, thanks to vaccines allowing people to go out and spend again. The BoE said it expects the UK economy to regain its pre-COVID size at the start of 2022.

The UK’s 9.9% contraction in 2020 compares unfavorably with the rest of the G7. The US economy shrank 3.5%, while Canada’s economy is expected to have shrunk around 5%.

Germany shrank 5%, France contracted 8.3% and Italy’s economy finished the year 8.8% smaller. Japan’s GDP is expected to have contracted around 5.5%.

Read More: BlackRock says investors haven’t fully priced in the structural changes brought about by the pandemic – and pinpoints 2 areas of the market that can still run for years

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The UK economy is on the brink of a double-dip recession after it shrank 2.6% in November amid surging COVID-19 cases

England went into a second, month-long lockdown in November, hitting the UK economy

  • The UK economy shrank by 2.6% in November as England entered another lockdown.
  • Britain is on the brink of a double-dip recession and faces a tough winter as COVID cases rise.
  • Yet a fast vaccine rollout could help the economy recover in the spring and summer.

The UK economy shrank 2.6% in November as an increase in coronavirus infections and fresh restrictions exacted a heavy toll, official figures have shown, putting the country on track for a double-dip recession.

November’s drop was considerably lower than the 5.7% contraction economists predicted in a Reuters poll. But it meant the economy was 8.5% smaller than it was in February 2020, having been 6.1% smaller in October, the Office for National Statistics said.

Since November the UK government has tightened lockdown measures, meaning more pain is yet to come for the economy.

Ministers are focused on rolling out coronavirus vaccines, however, which they hope will allow growth to start bouncing back in the spring.

The 2.6% contraction in November, when England was placed into a month-long lockdown, followed an expansion of just 0.6% in October.

Britain’s all-important services sector shrank 3.4% in November, the ONS said, but the production sector contracted just 0.1%.

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It puts the UK on track for a double-dip recession – with the economy set to fall into a sustained period of contraction after returning to growth in the third quarter of 2020.

Coronavirus cases have soared in recent weeks, thanks in part to a new, more infectious variant. More than 370,000 people tested positive in the last seven days while more than 7,500 people died, up 50% from the previous week.

Commenting on the economic figures, chancellor Rishi Sunak said: “It’s clear things will get harder before they get better and today’s figures highlight the scale of the challenge we face.

“But there are reasons to be hopeful. Our vaccine roll-out is well underway and through our plan for jobs we’re creating new opportunities for those most in need,” the finance minister said.

The UK economy shrank at a record pace of roughly 20% in the second quarter of the year, before growing by around 16% in the following three months.

But many economists now predict gross domestic product shrank in the final quarter of 2020, and many say it is set to contract further in the first three months of 2021.

The pound edged down on Friday morning, slipping 0.2% on the day against the dollar to trade around $1.3663, although it was up from a session low of $1.3659.

The FTSE 100 fell 0.42% at the open as traders digested the data. UK benchmark 10-year gilt yields were a whisker lower at around 0.287%.

Many analysts highlighted that November’s fall in GDP was not as bad as expected. Alpesh Paleja, lead economist at the UK’s Confederation of British Industry, said the impact of the looser restrictions in November was “was significantly smaller than the downturn seen in the spring”.

“Steps taken by businesses earlier in the year to COVID-proof their operations – combined with the time-limited nature of the restrictions, and schools remaining open – meant more companies were able to continue trading safely.”

However, Goldman Sachs predicted last week that the new country-wide lockdown put in place earlier this month would cause the UK economy to shrink 1.5% in the first quarter of 2021.

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“We estimate that the economy will be around 11% below its pre-COVID level by the end of Q1,” Goldman Sachs said.

“The fundamental reason is that UK activity is more reliant on covid-sensitive consumer spending than any of the other large advanced economies.”

The Bank of England increased its bond-buying programme by £150 billion ($205 billion) in November in a bid to ease conditions in the economy amid fresh lockdowns.

On Tuesday, BoE governor Andrew Bailey said Britain was facing a “very difficult period”. Yet he said that “the darkest hour is the one before the dawn”.

Bailey on Tuesday said there were “lots of issues” with cutting interest rates into negative territory from the current record-low level of 0.1%. His comments helped the pound.

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