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UK growth already sleepwalking before Omicron

by LLB Reporter
10th Dec 21 9:18 am

Gross domestic product (GDP) is estimated to have grown by 0.1% in October 2021 and is 0.5% below its pre-coronavirus (COVID-19) pandemic level (February 2020), according to the Office for National Statistics.

Services output grew by 0.4% in October 2021, with the most significant contribution coming from human health activities, which grew by 3.5%, mainly because of a continued rise in face-to-face appointments at GP surgeries in England.

Services output overall has now reached its pre-coronavirus pandemic level (February 2020); consumer-facing services are 5.2% below their pre-pandemic levels, while all other services are 1.4% above.

Danni Hewson, AJ Bell financial analyst, comments on October’s GDP figures:

“The latest GDP figures will make for difficult reading for the hospitality sector in particular.  A pound can only be spent once and amidst warnings of Christmas shortages and a plea to buy early from retailers, consumers would have made an understandable decision.  It’s not that people weren’t going out its just they were biding their time, ready to leap into a festive flurry of socialising that’s now been cut off or at least curtailed for many.

“Overall growth had all but sleepwalked upward, the line flirting ever closer to pre-pandemic levels but held back by supply shortages, principally those pesky chips and materials like steel and concrete, the bedrock of the construction industry which has taken a massive step back.  Whilst the services sector overall has been flying, it’s hard not to look at October’s figures through December’s lens. Omicron has brought new restrictions with it, the slow return to form for sectors like travel and tourism will take a beating.

“And when you consider the flurry of new hires might only be on temporary contracts, clocking on to help with Christmas demand or for Covid cover there are big questions about how the economy can be expected to fare in the new year.  The government asked consumers to spend their way out of the country’s pandemic stupor and they did.  Cushioned by furlough, bolstered by the stamp duty holiday and tempted by one off campaigns people were ready and able to help out.  2022 is already shaping up to be a different proposition. Budgets already squeezed will have to breath in a bit more to cover rising prices, particularly energy, increases to council tax and that social care levy.

“The economic engine will be thrown into reverse, how far back it drifts will depend on how long the restrictions are in place and whether Plan B does the job the government needs it to do.”

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