- UK economy grows 0.2% in Q2 vs previous estimate of -0.1%
- Production is still below pre-pandemic peaks, according to new estimates
- UK’s large current account gap narrows than forecast
LONDON, September 30 (Reuters) – The UK economy grew unexpectedly in the second quarter, but was below its pre-pandemic peak, contrary to a previous estimate that it had recovered, according to data showing the magnitude of the challenge ahead the new British Prime Minister is Liz Truss.
Figures from the Office for National Statistics also showed that the UK current account deficit – a major concern for foreign investors – was smaller than expected.
The ONS said economic output rose 0.2% from April to June, revised up from an earlier 0.1% decline.
Sign up now for FREE unlimited access to Reuters.com
However, the ONS has revised downwards its estimate for Britain’s recovery from the COVID-19 pandemic, reflecting a bigger hit to the economy than originally thought in 2020, as health lockdowns paralyzed businesses across the country.
“Real GDP levels are now estimated at 0.2% below pre-coronavirus levels in the fourth quarter of 2019, which has been revised down from previous estimates of 0.6% above,” the ONS said.
The ONS said it now believes the UK economy shrank by 11% in the year the coronavirus hit the country, a sharper contraction than the previous estimate of 9.8%.
Samuel Tombs, UK chief economist at Pantheon Macroeconomics, said the figures suggested the damage done to the economy’s ability to grow by COVID-19 and Brexit was even greater than previously thought.
“These revisions will force the Office of Budgetary Responsibility to further downgrade its estimates of future potential GDP,” he said.
Britain’s new finance minister, Kwasi Kwarteng, released an economic plan last week that he said would boost growth through tax cuts.
Investors responded by selling sterling and UK government bonds – bringing new focus to the country’s large current account deficit.
The current account gap for the April-June period narrowed to 33.8 billion pounds ($37.60 billion). Economists polled by Reuters had pointed to a deficit of around £44 billion. ($1 = 0.8990 pounds)
The deficit was smaller than a deficit of 43.9 billion in the first quarter, which was revised down from an earlier estimate in part due to energy companies, buoyed by rising prices, making more profits abroad than originally thought.
The January-March deficit remained the largest on record, the ONS said.
Sign up now for FREE unlimited access to Reuters.com
Reporting by Andy Bruce Edited by Willam Schomberg
Our standards: The Thomson Reuters Trust Principles.
Comments are closed.