Office for National Statistics figures showed that Britain’s economic recovery came to a halt in July

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Britain’s economic recovery from the Covid pandemic has begun to unwind, with new figures showing that gross domestic product rose by just 0.1 per cent in July – down from 1 per cent in the previous month.

The Office for National Statistics figures came despite businesses across the UK being allowed to fully reopen for the first time in months.

Companies have been hit by a so-called ‘epidemic epidemic’ – when the NHS app asks people to isolate after coming into contact with a positive case of Covid – which has led to staff shortages.

Supply chain problems blamed on the pandemic and Brexit have also led to some shortages of materials, hurting the construction industry in particular.

Meanwhile, retailers saw a drop in trade and lawyers also took a hit due to the tapering off stamp duty holiday in the real estate market.

“After several months during which the economy has grown strongly, accounting for a lot of ground lost from the pandemic, there has been little growth overall in July,” said Jonathan Athoe, a national deputy for economic statistics.

Oil and gas provided the strongest boost, having partially recovered after summer maintenance. Auto production also continued to recover from the recent shortage of components.”

He added: “The services sector has seen no growth overall with growth in information technology, financial services and external events – which could be fully operational in July – to offset significant declines in retail and law firms.”

Meanwhile, rising costs and a shortage of raw materials have caused the construction sector to bounce back.

The Office for National Statistics said the construction sector saw production fall by 1.6 percent in July, while retailers saw a 2.5 percent drop.

One positive sign came from the arts, entertainment and recreation sector, which was boosted by 9 per cent after restrictions on social distancing were lifted on July 19.

Economists had expected a slowdown in GDP growth in July, although this was expected at 0.5 percent, according to the median forecast of economists compiled by the Pantheon Macroeconomics Institute.

The numbers limit the recovery from the epidemic. GDP is still 2.1 percent below its level in February 2020, just before the pandemic.

Albesh Baleja, chief economist at the Confederation of British Industry, said: “The UK’s economic recovery continued in July on the back of the pandemic gathering pace.

“Labour shortages and supply chain disruptions have persisted ever since, and will likely take the edge on growth as we approach fall.

Companies are hoping the bulk of the supply disruptions will be temporary, but companies aren’t confident that all shortages will fade any time soon.

To help alleviate these pressures, temporary, targeted interventions are needed to enable businesses to keep their doors open – for example, putting heavy truck drivers on a list of underperformed occupations can make a real difference.

“In the long term, both companies and government should invest in reskilling and training, particularly in areas that support meeting future demand.”

The Office for National Statistics also reported UK trade figures.

It added that the trade deficit – the difference between imports and exports – widened by 1.5 billion pounds to 4.9 billion pounds in July.

Goods imports rose 5.8 percent to 6.3 billion pounds in the three months to July, while exports increased 5.7 percent to 4.5 billion pounds.

The Office for National Statistics said imports of goods declined from EU countries, driven in particular by imports of clothing and footwear.

“UK exporters are losing their competitive advantage,” said Anna Boatta, head of macroeconomic research at credit insurer Euler Hermes.

Since its peak in 2017, financial services – the UK’s largest export sector – has steadily lost market share.

“The UK is the only top 10 country to see this happen, with Brexit exacerbating the downturn.”

Additional coverage by the Press Association

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