UK economic system nonetheless under pre-pandemic measurement, underscoring problem for Truss By Reuters

By Andy Bruce

LONDON (Reuters) – Britain’s economic system unexpectedly grew within the second quarter however was under its pre-pandemic peak, opposite to an earlier estimate that it had recovered, based on knowledge that confirmed the size of the problem dealing with Britain’s new Prime Minister Liz Truss.

The figures from the Workplace for Nationwide Statistics additionally confirmed Britain’s present account deficit – an enormous concern of overseas traders – was narrower than anticipated.

The ONS mentioned financial output rose by 0.2% in April by June, revised up from a earlier studying of a 0.1% contraction.

However the ONS revised down its estimate for Britain’s restoration from the COVID-19 pandemic, reflecting a much bigger hit to the economic system than first thought in 2020 when well being lockdowns shut down companies throughout the nation.

“The extent of actual GDP is now estimated to be 0.2% under the place it was pre-coronavirus at Quarter 4 2019, downwardly revised from earlier estimates of 0.6% above,” the ONS mentioned.

The ONS mentioned it now believed Britain’s economic system shrank by 11% within the yr coronavirus hit the nation, a extra extreme contraction than the earlier estimate of a 9.8% hit.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, mentioned the figures prompt that the harm inflicted to the economic system’s means to develop by COVID-19 and Brexit was even bigger than beforehand thought.

“These revisions will compel the Workplace for Funds Accountability to revise down additional its estimates for future potential GDP,” he mentioned.

New British finance minister Kwasi Kwarteng final week printed an financial plan that he mentioned would spur progress by reducing taxes.

Buyers responded by promoting the pound and British authorities bonds – placing the nation’s giant present account deficit into new focus.

The present account hole within the April-June interval shrank to 33.8 billion kilos ($37.60 billion). Economists polled by Reuters had pointed to a deficit of roughly 44 billion kilos. ($1 = 0.8990 kilos)

The shortfall was smaller than a 43.9 billion deficit within the first quarter which was revised down from an earlier estimate partly as a result of power corporations, buoyed by surging costs, making extra revenue overseas than initially thought.

The January-March deficit remained the most important on report, the ONS mentioned.