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UK Economy Returns to Growth Amid COVID-19 Restrictions

April 17, 2021 by Elaine Margaux

The UK economy returned to growth in February. This is despite pressure from continuing government Covid restrictions.

Businesses adapted to lockdown, and EU exports staged a partial recovery.

UK Recovery 

The Office for National Statistics said gross domestic product (GDP) rose by 0.4% in February from a month earlier.

The economy showed some signs of improvement after a revised drop of 2.2% in January.

Despite the toughest lockdown measures since the first wave of the virus remaining in place, retailers recorded a sales pickup.

Growth in car production fueled a rise in manufacturing activity after a poor January, and construction grew strongly.

However, the economy remains 7.8% smaller than in February 2020 before the pandemic struck.

Economists said the improved performance came as businesses and households adapted to restrictions.

They also started making preparations for relaxed controls after the government announced its roadmap for exiting lockdown.

Suren Thiru, the head of economics at the British Chambers of Commerce, said the easing of pandemic measures would help release further pent-up demand over the coming months.

This is alongside rapid progress in the vaccine program,

“However, the hope of a sustained consumer-led revival may prove too optimistic,”

“The economic scarring caused by Covid may trigger a renewed reluctance to spend as government support winds down,” he said.

UK Exports is Doing Good

UK exports of goods to the EU recovered after a record plunge during January in the first month since Brexit.

Exports rose by £3.7bn, or 46.6% on the month as businesses started to adapt to the new relationship.

This is after a pause in deliveries a month earlier due to the Covid lockdown and fears over Brexit border disruption.

The ONS said the increase in exports was driven by machinery and transport equipment, and chemicals.

Particularly cars and medicinal and pharmaceutical products.

However, EU exports remained about 11% below levels a year earlier.

Reflecting the continuing impact of border friction since leaving and disruption caused by Covid.

The bounce-back followed shallow volumes in January.

After companies stockpiled goods in December before the Brexit deadline.

It held back from sending shipments at the start of the new trading relationship.

The toughest Covid restrictions since the first wave of the pandemic in both the UK and the EU.

This led to reduced demand for goods and services.

Increased Exports on Economy’s Recovery

In February, increased exports of goods were largely recorded in machinery and transport equipment and chemicals to the EU.

The monthly export of cars returned close to similar levels a year ago.

While chemical exports were driven by a rise in medicinal and pharmaceutical products’ shipments to Belgium, where large volumes of Covid vaccines are produced.

In February, exports of food and live animals to the EU rose by £300m, about 77%.

After significant disruption during the first month since Brexit.

Exports of fish and shellfish, one of the worst-affected areas due to their short shelf life, recovered.

Although they remain below levels recorded a year ago.

The latest snapshot for the economy suggests the UK could stage a faster recovery this year than first anticipated.

Driven by a bounce-back in business activity and consumer spending as restrictions are relaxed.

Some sectors are expected to recover more than others, while risks remain from new COVID-19 variants.

While hospitality was down by more than 50% in February on a year earlier.

The arts by more than a third, the manufacturing and construction sectors were only 4% smaller.

Filed Under: Economy

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