UK Economy in November at levels higher than pre-Covid

By Dearbail Jordan
BBC News, Business reporter

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The UK economy surpassed pre-Covid levels for the first time in November after recording stronger-than-expected growth.

According to Office for National Statistics (ONS), the gross domestic product or GDP grew 0.9% between October & November.

This was higher than the economists expected and meant that February 2020 saw 0.7% more economic activity than February 2020.

There is some concern that the growth rate may slow down once again due to the Omicron spread and Plan B.

Grant Fitzner, chief economist at ONS, stated that the economy had grown strongly before Omicron hit. This was despite architects, merchants, couriers, and accountants experiencing a record month.

As many raw materials were easier to find, construction also recovered after several poor months.

Capital Economics analysts said that the economic growth of 3.5% in construction was responsible for the increase. They also added, “The unusually dry weather likely helped”.

The report also stated that manufacturing output improved, and that the profession sector picked up as well. This is “apparently because architectural and engineering activities were brought forward starting December”.

What exactly is the GDP?

The Gross Domestic Product (or GDP) is one way to measure how well or poorly an economy is performing.

It is an indicator of the amount of activity in an economy by individuals, government and companies.

The GDP allows companies to decide when they should expand or hire more employees, while the government can determine how much tax to pay.

Rising GDP could lead to more employment opportunities, as well as better salaries for employees.

When GDP falls, it means that the economy shrinks – which is bad news for workers and businesses.

Covid’s pandemic caused the worst recession in more than 300 years. It hurt business and jobs and forced the government to take out hundreds of billions to sustain the economy.

  • Find out more information about GDP

According to economists, the November GDP growth rate was 0.4%.

Rishi Sunak, Chancellor of India, said that the strong growth is a testimony to “the grit and determination” of British citizens.

Samuel Tombs (chief UK economist, Pantheon Macroeconomics) said that “GDP nearly certainly fell in December as households settled down to respond to the Omicron variant.”

At the end November, Omicron was created. Plan B measures were implemented on December 8.

Tombs claimed that statistics such as transport use, restaurant diner number, and revenues from cinemas “point towards a pullback of consumer services expenditures” while Omicron depressed “labor supply”.

But he said: “Omicron appears set to fade almost like it arrived. This is partly due to the rapid rollout booster jabs. We expect that the government will allow Plan B to expire automatically on 26 January, and GDP to rebound in February.

Analysis: Is there a brief reprieve from the storm?

by Vivienne Nunis, BBC business correspondent

These results show that UK’s economy is capable of rebounding quickly when the coronavirus number drops and problems in global supply chains are addressed.

Many people did their Christmas shopping early in November. They felt confident eating out or visiting the theatres, as well as feeling comfortable indoors.

However, it was not to be. In December Omicron had become a popular variant, so the government again asked us to work at home. Meanwhile restaurants were seeing their business drop off the cliff.

Omicron’s rapid growth also caused a shortage of labour as more staff were called into sick. This affected production.

These factors are likely to result in a slowdown of economic growth in December.

The cost of living will rise as interest rates, national insurance, and energy prices all increase.

Today’s numbers are encouraging, but economists don’t expect them to be the last word.

According to the ONS, the UK’s economy could reach or exceed pre-Covid levels in the third quarter of 2021 if the GDP growth in December is at least 0.2% and November figures are not revised downwards.

Many economists warned that there would be a slowdown in growth during the first month of 2012.

We expect that growth will slow down in 2022, as it can no longer rely solely on the [Covid]It will be driven by the rebound effect,” Yaelselfin, KPMG UK’s chief economist.

“In addition to rising taxes, borrowing costs and elevated inflation will squeeze households’ purchasing powers, while the lingering effect of supply chain bottlenecks along with persistent labour shortages could limit production this year.”

According to the Bank of England, inflation is likely to reach 6% in spring. The Bank of England raised its key interest rates in December. It is also forecasting to increase borrowing costs this year.

In April, the government will increase the National Living Wage to 6.6% for those over 23 years old. However, this month will also see Ofgem implement the new price limit on electricity and household gas bills.

Ofgem will likely raise the price cap after a dramatic rise in wholesale gas prices that forced 20 small energy companies to close their doors last year.

National Insurance will also be available to employers, workers, and those who are self-employed starting in April.

Source: BBC.com

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