UK Economy Grew More Slowly Than Thought Before Omicron Hit
Britain’s economy
grew more slowly than previously thought in the July-September period, before
the Omicron variant of the coronavirus posed a further threat to the recovery
later in the year, official data showed on Wednesday.
Gross domestic product in the world’s fifth-biggest
economy increased by 1.1% in the third quarter, weaker than a preliminary
estimate of growth of 1.3% as global supply chain problems weighed on
manufacturers and building firms.
That was slower than the economy’s 5.4%
bounce-back in the second quarter when many coronavirus restrictions were
lifted, the Office for National Statistics said.
Investors are braced for a further
slowdown in the fourth quarter of 2021 and a weak start to 2022 due to a rise
in COVI9-cases caused by Omicron which has hurt Britain’s
hospitality and leisure sector and hit retailers.
Prime Minister Boris Johnson has
ruled out new COVID restrictions in England before Christmas but said he might
have to act afterwards. Scotland and Wales have tightened controls.
“Although the
economy has got better at coping with restrictions with each new wave, the
possibility of tighter restrictions in January is further darkening the outlook
for GDP,” Bethany
Beckett, an economist with consultancy Capital Economics, said.
The ONS said households dipped into
their lockdown savings to finance their spending. The savings ratio fell to
8.6% of disposable income, down from almost 11% in the second quarter.
Weakness in the health sector, where
test and trace work and vaccinations tailed off, and among hairdressers were
partly behind the cut to the third-quarter growth estimate.
A fall in energy output, after a
surge in demand during a cold spring in the second quarter, also weighed.
“However,
stronger data for 2020 means the economy was closer to pre-pandemic levels in
the third quarter,” ONS Director of Economic Statistics
Darren Morgan said.
The slump in Britain’s economy
last year was now estimated at 9.4%, revised from a 9.7% crash, and the ONS
believed GDP in September was 1.5% below where it was at the end of 2019,
revised up from the previous estimate of 2.1%.
However, Britain’s progress
towards regaining its pre-pandemic economic size, in inflation-adjusted terms,
remained behind that of most other big rich economies such as France, Germany
and the United States, the ONS said.
Business investment fell by 2.5% in
the third quarter from the previous three months and was nearly 12% below its
pre-pandemic level.
The Bank of England is hoping for a
revival of business investment to help improve Britain’s
longer-term growth prospects.
Britain’s balance of
payments deficit widened to 24.4 billion pounds ($32.35 billion) as goods
exports fell, goods imports grew and foreign companies received more income
from their investments in the United Kingdom.
Economists polled by Reuters had
expected a smaller deficit of 15.6 billion pounds.
As a share of GDP, the shortfall
almost doubled to 4.2% from 2.3% in the second quarter.
($1 = 0.7542 pounds)
(Writing by William Schomberg,
editing by Andy Bruce, Kirsten Donovan)