This morning the Office for National Statistics (ONS) revealed that the UK economy had grown by 15.5 per cent during the summer
Jane Imrie

“Keep the champagne on ice for now”: business leaders respond to latest GDP growth figures

This morning the Office for National Statistics (ONS) revealed that the UK economy had grown by 15.5 per cent during the summer.

The period of growth coincided with the relaxing of COVID-19 restrictions following the first lockdown, as well as the introduction of the government’s Eat Out To Help Out scheme.

Bdaily spoke with business leaders across the country to get their reactions to the news, and what they believe it means for the coming months.

Suren Thiru, head of economics at the British Chambers of Commerce (BCC)

“While there was confirmation that the UK exited recession, the historically strong headline figure masks a loss of momentum through the quarter, as the temporary boost from the release of pent-up demand as the economy reopened gradually faded.

“With output still well short of pre-crisis levels there was little sign of a ‘V’-shaped recovery even before the latest lockdown.

“Although less restrictive than the first, a second lockdown means that output is likely to contract in the fourth quarter.

“With much of the economy now in a weaker position to withstand periods of extended closure than at the start of the pandemic, the damage to economic activity in the near term may be significant, particularly if restrictions extend beyond 2 December.

“Until a vaccine is rolled out, mass testing remains crucial to getting the economy moving and avoiding further damaging lockdowns. With many firms facing a significant cash crisis, increased grant support for those impacted by restrictions is vital to helping the UK economy weather a difficult winter ahead.”

Laith Khalaf, financial analyst at AJ Bell

“A strong rebound in the economy is clearly positive, but we should keep the champagne on ice for now.

“The summer boom was turbo-charged by the Eat Out to Help Out scheme, while the furlough scheme worked its magic by keeping unemployment under wraps. But if you shut down an economy and then open it up, it’s not hugely surprising that you get a huge seesaw effect in quarterly GDP numbers.

“A swollen summer of economic activity hasn’t repaired the damage done in the first half of year though and the new lockdown means the UK can expect to end 2020 significantly behind where it started. The Bank of England estimates an 11% contraction in the economy over the course of the year.

“The real litmus test for the economy going forward is how soon it can return to pre-pandemic levels. News of a potential vaccine makes the climb back look a lot less daunting, not only because it offers the prospect of a brighter future, but also because it gives businesses and individuals greater confidence in the here and now.

“Businesses can see a glimmer of light at the end of the tunnel, rather than an interminable struggle to stay afloat until we return to some semblance of the old normal at some unknown point in the future.

“Markets have already responded to Pfizer’s coronavirus breakthrough by pricing in better times ahead, but the economy is a more sluggish beast, and it will take time to build up a head of steam.

“Things also look like they will get worse before they get better, with rising unemployment on the cards over the course of the winter. January is a prime month for insolvencies, as troubled businesses throw in the towel after one last hurrah over the Christmas period.

“Failed Brexit negotiations could also give the economy an unhelpful shove in the wrong direction.

“A vaccine provides some much needed hope for the economy in 2021. But in the topsy turvy world of ultra-stimulative monetary and fiscal policy, good news can sometimes be bad news, because economic progress is offset by expectations that the props currently holding up the economy will gradually be kicked away.

“We saw that most clearly during the “taper tantrum” of 2013, when the US economy improved to the extent that the central bank dared to suggest it might start to gently wind down its Quantitative Easing programme. Borrowing costs promptly spiked, with the 10 year US treasury yield almost doubling in fright.

“If a vaccine can deliver us from coronavirus in 2021, we may once again witness that strange dance taking place between economic growth and stimulus withdrawal.”

Jon Dweck, founder and CEO of Space Three Two

“Finding the silver linings in a pandemic can be a tough undertaking. Not only are we in the biggest economic contraction for 300 years, the loss of life, and change to livelihoods, is unforeseen.

“But one area we can look ahead to for a silver lining is on the UK’s shocking productivity record, which last quarter collapsed at its fastest rate on record.

“Recessions increase the pressure on unproductive businesses to adapt or fail. For most, it’s meant firms have had to adapt to unprecedented social distancing rules and embrace greater levels of technology to make it easier for employees to not only work from home, but feel happy and comfortable doing so.

“From our own research we know the vast majority of employees don’t want to return to the office five days a week once all Covid-19 restrictions have been lifted, instead craving a mix of time in the office and at home, aiming for 2.7 days in the office on average.

“1 in 10 workers (11 per cent) said they didn’t want to go back to the office at all. And if businesses get this balance right after Covid-19, there can be a huge number of benefits for both business productivity and employee happiness.

“Employees who are less stressed and on the whole happier, are more productive. And more productive employees leads to greater revenue streams for the business, in turn helping to boost the economy.

“Covid-19 might have had a huge impact on all our lives, but the change in working habits can’t be ignored. If firms embrace this new-found balance of life at home and in the office, it has the potential to do wonders for UK productivity.”

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