By no means in historical past has the UK financial system grown extra shortly than it did within the third quarter of 2020. Official figures present that the spending spree of the summer time was even stronger than beforehand anticipated, leading to a 16% enhance in nationwide output.
But the packed seashores, the busy outlets and the battle to get restaurant bookings throughout August’s eat out to assist out promotion already look like historic historical past. It’s of solely passing curiosity that the Workplace for Nationwide Statistics now says the stoop in gross home product within the spring was barely much less extreme than first feared and the rebound between July and September was a tad stronger.
However the second wave of the pandemic meant the buoyancy of the summer time was short-lived. Because the ONS figures for the public finances present, the tightening of restrictions on exercise have had a marked impression. The speak now could be of a double-dip recession slightly than a V-shaped restoration.
Protecting tens of millions of employees on furlough comes at a worth. So does the additional funding within the NHS. The federal government borrowed £31.6bn final month – a document for a November and the third highest month-to-month whole on document.
Within the first eight months of the 2020-21 monetary yr, borrowing topped £240bn. In contrast with a yr earlier, tax and nationwide receipts had been down by £38.3bn whereas day-to-day spending by the state was up by £147.3bn.
This sample seems set to proceed. The truth that Rishi Sunak has extended the furlough to the top of April is a transparent signal that ministers count on powerful social distancing guidelines to be in place for months to come back. The Workplace for Price range Accountability was anticipating full-year borrowing of £394bn even earlier than the brand new tier 4 curbs had been launched on the weekend.
Sunak could take some consolation from the small print of the ONS nationwide accounts figures, which reveals that the summer time growth was partially as a consequence of households working down the financial savings that they had accrued throughout the spring lockdown. The financial savings price – the proportion of family earnings saved slightly than spent – fell from 27.4% to 16.9% within the third quarter however nonetheless greater than double its long-term common of 8%.
In accordance with Ruth Gregory, a UK analyst at Capital Economics, that means scope for spending to select up strongly when restrictions are lifted. That joyful day, although, is a way off.
