UK economy was flatlining before COVID-19 lockdown

Gross Domestic Product figures from the Office for National Statistics show the UK economy was in bad shape even before the pandemic. The website covers production, distribution, consumption and trade of goods and services of UK economic activity. The statistics of GDP are released on a monthly and quarterly basis and they estimate the size of and growth in the economy.

The figures are calculated by comparing GDP in a three-month period such as December to February, with GDP in the previous three-months such as September to November.

In the GDP monthly estimate report from February 2020, it says: 

“Most elements of the services sector grew, though manufacturing continued to decline. Construction saw a notable fall in February, as wet weather and flooding hampered housebuilding.

“The underlying trade balance moved into surplus in the latest 3-months, the first seen since comparable records began over 20 years ago. This surplus was caused by a large fall in goods imported from EU countries.”

In the published report, some negative impacts can be noticed in industries such as travel agents or tour operators, even though the gross domestic products was unaffected. Report describes the services sector as the only positive contribution, having 0.15 percentage points and rolling three-month growth to February 0.2%. It was compared to the Index of Production having -0.08 percentage points and -0.6% rolling three-month growth; Construction having -0.01 percentage points and -0.2% rolling three-month growth. The construction sector has caused GDP to fell by 0.1% in February, even though the report describes a good performance from manufacturing sector that happened for a second month in a row.

In March, the government advice was for everyone to stay in their homes and only leave the house for a limited number of reasons, which included for example one form of daily exercise or essential shopping. According to Financial Times website, the economic sentiment dropped in the first half of March as the pandemic began to have impact on jobs, before restrictions were imposed.

In the Sky News article from 9 April by Sharon Marris, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said:

“Looking ahead, we have assumed that GDP will be about 20% below normal during the lockdown, which we expect to last three months.”

He also said in the article that the mass testing and contact tracing, with having social distancing measures in place, can keep the virus infection numbers at a manageable level for the NHS without government having to maintain the severe restrictions that were set.

The provided data from the Office for National Statistics shows the struggle of the UK economy, before the restrictions were put in place to stop the spread of coronavirus. There was a decline in manufacturing output and fall in constriction during February. According to the ONS, the average growth in three months to January was zero, after the economy grew by 0.3 per cent in December.

By: Julita Waleskiewicz

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