UK economy accelerates in April with monthly growth of 2.3%

Gross domestic product grew at the fastest rate since July last year

Workers walk along a street in the City of London. The country’s economic output was 27.6% higher in April than in the same month 12 months earlier. Bloomberg

Britain’s economic recovery accelerated in April, growing 2.3 per cent from March – the fastest growth in nine months – as lockdown restrictions eased across the country.

The country’s economic output was 27.6 per cent higher in April than in the same month 12 months earlier when the country was in total lockdown at the start of the pandemic, the Office for National Statistics said.

Chancellor of the Exchequer Rishi Sunak described the figures as a “promising sign that our economy is beginning to recover”.

“With more than a million people coming off furlough across March and April and the number of employees in work rising, it is clear that our Plan for Jobs is working,” he said.

While the ramp up in momentum tied in with the April opening of shops, hairdressers and restaurants serving outdoors, the country’s economic output is still 3.7 per cent lower than in February last year, before the pandemic took hold and led to lockdown measures.

The April bounce back was boosted by strong growth in the dominant services sector, in which output grew 3.4 per cent, led by rises retail spending, increased car and caravan purchases, schools being open for the full month and the beginning of the reopening of hospitality.

However, Jonathan Athow, deputy national statistician at the ONS, said “declines in the often-erratic pharmaceutical industry, shutdowns in many car plants and large-scale oilfield maintenance pulled back the headline rate of growth”.

Economists have increased their outlook for the UK recovery based on the strength of the country’s vaccination drive, signs of pent-up demand and lower-than-expected unemployment rates.

The Bank of England expects 2021 to be the UK's strongest year of growth since the Second World War, with a surge in output of 7.25 per cent and the economy returning to its pre-pandemic level by the end of the year. It follows the worst recession in 300 years in 2020.

However, Danni Hewson, AJ Bell finance analyst, said the recovery seems "lumpy", with delays in lifting restrictions set to make it "even more bumpy".

“The service sector is still far below its pre-pandemic levels and many in the hospitality sector are concerned about making it through the summer if social distancing continues to constrain sales,” said Mr Hewson.

The UK hospitality industry warned earlier this month that it could lose 500,000 jobs when the government's furlough programme to support wages ends.

Hotels, restaurants and bars will have back taxes of £93 million, which will become unsustainable if the government does not end all lockdown rules as planned on June 21, warned Kate Nicholls, of business lobby group UK Hospitality.

The proportion of employees on furlough sank to 8 per cent in May, equivalent to 2.1 million workers and the lowest level since October.

Mr Sunak acknowledged on Friday that “people will still need our support” and reiterated that the scheme will remain in place until September.

However, Mr Hewson said there had already been calls for the chancellor to consider extending the programme into the autumn for sectors unable to get back to fighting strength.

“The next few months will bring challenges,” she said.

Prime Minister Boris Johnson wants to fully lift lockdown restrictions in England on June 21, but with the Delta variant of Covid-19 first detected in India spreading fast, he has said the date could be delayed.

Rory Macqueen, principal economist at the National Institute of Economic and Social Research, said economic output in May will follow a similar pattern to April as further restrictions were lifted, as will June if the final step of the roadmap goes ahead.

“But falls in construction and production, which were less affected by the 2021 lockdown, remind us that our focus should now be on the prospects for the economy in the second half of the year, after temporary reopening effects have ceased to provide strong monthly increases," said Mr Macqueen.