UK economy grew 1.8% in May but output still a quarter below pre-crisis levels

The UK economy grew by 1.8% in May as activity began to recover with the easing of coronavirus lockdown but remained a quarter below its pre-pandemic levels, according to official data.

The Office for National Statistics (ONS) said the economy eked out growth as manufacturing and housebuilding showed signs of recovery after restrictions began to be lifted in May.

Despite the month-on-month increase in gross domestic product (GDP), output is still a long way from recovering from the record falls seen in March and April when Britain was in full lockdown – and was 24.5% lower compared with February before the crisis struck.

May’s GDP growth is also far short of the 5% rise expected by most economists.

Jonathan Athow, deputy national statistician at the Office for National Statistics (ONS), said of the May economy figures: “Manufacturing and house-building showed signs of recovery as some businesses saw staff return to work.

“Despite this, the economy was still a quarter smaller in May than in February, before the full effects of the pandemic struck.

“In the important services sector we saw some pick-up in retail, which saw record online sales.

“However, with lockdown restrictions remaining in place, many other services remained in the doldrums, with a number of areas seeing further declines.”

The ONS said GDP plunged 19.1% in the three months to May.

May’s meagre bounce back comes after GDP contracted at a record-breaking pace in March and April when the economy was brought to a virtual standstill, falling by a downwardly revised 6.9% and 20.3% respectively.

The data showed the all-important services sector grew by 0.9% in May, while manufacturing rose 8.4% and construction by 8.2% as factories and building sites started to get back on stream.

But the three-month figures reveal the toll taken over the height of the lockdown, with output in the services sector – which accounts for three quarters of UK GDP – still 24.4% below February levels seen before the pandemic, with much of the retail sector still mothballed in May.

Non-essential shops were only allowed to reopen in mid-June across England, while pubs and restaurants remained shut until early July.

The figures also showed manufacturing activity in May was 22.3% lower than in February and construction a mammoth 38.8% behind.

Experts believe June and July’s GDP data should show a bigger bounce back.

But Samuel Tombs at Pantheon Macroeconomics cautioned: “More recent data suggest that the reopening of the consumer services sector in July has got off to a sluggish start, with customers at restaurants, pubs and cinemas small fractions of pre-Covid levels.

“With surveys showing that households remain very fearful of contracting the virus, social distancing rules likely to limit the consumption of services until the population is vaccinated and employers set to lay off many furloughed workers in the autumn, we think that GDP still will be about 5% below its pre-Covid level by the end of this year.”