Britain’s Economic Recovery Grinds To a Halt
By: Jonathan Bell
Tags: UK, World, Brexit, Economics, Business

Britain’s Economic Recovery Grinds To a Halt

Photo by Grooveland Designs on Unsplash

It is no secret that Britain in particular has been hit hard by the coronavirus pandemic. In the nine months since the virus hit, Britain’s economy has contracted more than any other G7 nation, with the UK’s reliance on the services sector making it especially vulnerable to repeated lockdowns. It had been hoped that as the pandemic is brought under control and the economy begins to reopen, Britain would see a ‘V’ shaped recovery — in which rapid economic growth would lead to a quick bounce back. However, a more pessimistic outlook is now increasingly becoming Britain’s reality.

New data from the Office for National Statistics (ONS) has revealed that the UK economy grew by only 0.4% in October, with its economic recovery derailed by increased coronavirus restrictions. Under normal circumstances, this figure wouldn’t provoke such concern. October officially marks the sixth month in a row of growth for the UK, as the economy rebounded from its record 19.5% contraction back in April at the height of the pandemic.

However, whilst the UK’s economy continues to move in the right direction, growth has slowed considerably — and this is what will worry policymakers in Westminster. Although the economy had initially seen a record pace of recovery earlier in the year, September saw gross domestic product (GDP) growth of only 1.1%, with October experiencing an even sharper drop-off. Furthermore unemployment has continued to rise, with the economy still sitting around 8% below its pre-pandemic level.

All of this has meant that Britain is currently experiencing its worst downturn in 300 years, with its economic future now looking highly uncertain. And despite the UK taking a huge financial hit at the start of the pandemic, Britain’s path out of this slump is still fraught with danger.

Tough Times Ahead

Looking forward, the UK faces a number of challenges that will further exacerbate its current predicament and complicate its recovery. First and foremost is that the most recent economic figures do not reflect Britain’s second national lockdown — which ran from November until the start of December. This additional lockdown once again forced many businesses, such as shops and restaurants, to close for an extended period. Whilst this second lockdown is not predicted to have wreaked as much havoc as the first, the shuttering of pubs and retail stores across the nation will undoubtedly have had a major impact on the economy.

Additionally whilst the second national lockdown ended at the beginning of this month, much of the UK still remains under tight coronavirus measures. Under Britain’s tiered system, the majority of the country still faces heavy disruptions to their daily life — with clampdowns on gatherings, travel and social events particularly hitting sectors that rely on footfall. The travel and entertainment industries have braced for the impact of this blow, with business still below half that of the pre-pandemic level within these sectors. The recent announcement that London will now be placed into the highest tier has done little to raise confidence in Britain’s longer term outlook.

And finally, there is the issue of Brexit. With talks deadlocked between Britain and the European Union, the Brexit situation also threatens the UK’s economic recovery. Prime Minister Boris Johnson has said that a no deal scenario is now “very, very likely”, with his European counterparts also presenting a pessimistic outlook on the prospect of a late breakthrough.

The CBI, a UK based business group, have predicted that failure to secure a post-Brexit trade deal may push the UK’s recovery from the coronavirus back to 2024 — with the potential disruption caused by a no deal Brexit already having an economic impact on British businesses. Given that Britain crashing out without a deal is expected to cause widespread job losses and slash productivity, the UK-EU standoff could not have come at a worse time.

Looking To the Future

As if to underline the tough road ahead, Britain’s Chancellor Rishi Sunak recently warned that the “economic emergency” has only just begun, and the government has put a number of support packages in place to help alleviate the pandemic’s impact. This includes extending the furlough scheme — in which the government subsidizes the wages of employees that are unable to work — until March, with the government predicting that this would protect 300,000 jobs.

Speaking about the intervention, Mr Sunak said that the situation required “extraordinary measures to protect people’s jobs and incomes”, with the announcement of a vaccine also offering a welcome bit of news for business owners keen to see return to normality. Given that over 130,000 people were vaccinated in the first week alone, there may be some light at the end of the tunnel for Britain after all.

However, Britain’s path to economic recovery is both long and treacherous. Between repeated lockdowns and the Brexit fallout, the UK’s services driven economy is especially vulnerable to the pandemic’s ramifications — with Britain’s high street still littered with shuttered shops and boarded up restaurants. And given that restrictions do not look likely to be lifted any time soon, the prospect of a brighter future for the UK is still a long way down the line.

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