Britain’s recovery from the coronavirus pandemic continued for a third month in a row in July as shops reopened and manufacturing activity resumed but the economy has recovered little more than half the ground lost since the onset of the crisis.

The Office for National Statistics (ONS) said gross domestic product (GDP) rose by 6.6% in July compared with the previous month, continuing a rebound from the Covid-19 crisis as lockdown measures were relaxed.

However, in a reflection of the fragile nature of Britain’s economic fightback as the number of coronavirus infections rises, Rishi Sunak laid the groundwork for a delay to the autumn budget in a statement to the House of Commons.

The chancellor told MPs he had asked the Office for Budget Responsibility (OBR) to prepare economic forecasts to be published in “mid to late November,” but did not give a date for the set-piece tax and spending event.

The move is unusual because the official forecasts usually accompany the budget. Government sources indicated Sunak had been deliberately vague to allow the budget to be delayed if necessary due to the unprecedented economic uncertainty surrounding Covid-19.

According to the latest official growth figures, the reopening of pubs, campsites and hairdressers fuelled a rebound in activity in July, while car sales exceeded pre-crisis levels for the first time. After widespread stoppages during lockdown, manufacturing activity recovered and housebuilding activity rose, although the ONS said production and construction levels still remained well below previous levels.

The recovery in July followed growth of 8.7% in June and 2.4% in May, after a record-breaking 20% contraction in April during lockdown. Over the broader three-month period to the end of July, GDP fell by 7.6%, with declines across all main sectors of the economy.

The figures come after Britain entered the deepest recession since records began following a second successive quarterly decline in the three months to June. The fall in second quarter GDP of 20.4% outstripped any other advanced economy, with the UK entering lockdown later than other countries and taking longer to relax restrictions.

After staging a rapid recovery in recent months, GDP is now 18.6% higher than its lowest ebb in April after the pandemic brought activity around the globe to a standstill. However, it remains 11.7% below the levels recorded in February before the disease spread to Britain.

Concerns are mounting that Britain’s economic fightback from the crisis will falter as job losses rise and demand for goods and services remains depressed while risks to public health from the coronavirus crisis persist. According to the Bank of England, GDP is not expected to return to pre-crisis levels until at least the end of next year.

Thomas Pugh, a UK economist at the consultancy Capital Economics, said the government’s eat out to help out scheme will have boosted activity further in August as consumers were tempted back to restaurants across the country, but that now most sectors of the economy have reopened there was little scope for further large increases in monthly GDP.

“On top of that, talk of tax rises at the next budget, a further deterioration in the Brexit negotiations and a worrying rise in the number of virus cases and tighter social-distancing restrictions will all conspire to slow the recovery even further,” he said.

Business groups said a deal with the EU and further government support for jobs would be essential for embedding a sustainable economic recovery from the crisis, while calling on the chancellor to extend the furlough wage subsidy scheme to prevent a surge in redundancies this autumn.

Suren Thiru, the head of economics at the British Chambers of Commerce, a business lobby group, said: “With many firms continuing to face an unprecedented cash crisis and unemployment likely to surge as the support schemes wind down, there remains little prospect of a sustained resurgence unless substantial action is taken.”

Sunak said the government had extended its support for businesses and households by pumping money into job creation schemes, cutting VAT for the hospitality and tourism sector and launching the eat out to help out scheme.

“While today’s figures are welcome, I know that many people are rightly worried about the coming months or have already had their job or incomes affected. That’s why supporting jobs is our first priority and why we’ve outlined a comprehensive plan for jobs to ensure nobody is left without hope or opportunity,” he said.

Read more: https://www.theguardian.com/business/2020/sep/11/uk-economic-recovery-from-covid-19-crisis-continues

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