UK’s economic engine idles

Danni Hewson
10 September 2021

Danni Hewson AJ Bell financial analyst, comments on GDP figures for July 2021:

“July brought “Freedom” from restrictions, it was a hugely anticipated milestone that signalled the UK was back in business and firing on all cylinders. But the reality was bogged down by supply snarl-ups and labour shortages as workers became hostages of the “pingdemic”. Significantly the economic engine slowed so much in July it almost stalled and delivered the kind of growth not experienced since the country was plunged back into lockdown in January. Even more worrying is the fact that much of the 0.1% of growth achieved seemed to come from the return to service of an oil field production site which had been closed for maintenance, without that push these figures would have been even more uncomfortable to peruse.

“But there are some drop offs that were easy to predict. All that legal work pushed through to help house buyers squeak under the barrier that fell as the stamp duty holiday came to an end fizzled out. House builders struggled to find brickies and the materials to go with them and retail sales fell as cautious consumers considered their options. A bright spot was the huge jump enjoyed by the travel sector as sun-starved dreamers dared to hop on a plane and the return of sporting events and festivals was embraced by the British public.

“What was interesting to note was the decent uptick in vehicle manufacturing which was unexpected after dire warnings from the SMMT last month, but it does signal that at least one major supply chain hurdle might have been partially overcome and that chip shortage might be easing up. But it’s unlikely that signals the beginning of the end for supply chain issues; all evidence seems to suggest things will get worse before they get better, and many people expect this Christmas to be beset with rising prices and shortages.

“But no one expected the road to recovery wouldn’t be paved with potholes if they’ve ever driven the UK’s road network and many issues which hampered July’s growth have now been overcome. Isolation rules have been relaxed, much to the relief of employers up and down the country. The vaccination roll out has continued apace and Delta appears to have been kept at bay, at least for now. August’s figures will be coloured by the bright palate of summer, but September seems to have brought a new term full of old normals. The daily commute is getting busier, offices are being revisited and sandwiches are being bought and devoured. The engine may have come close to stalling in July, but the economy is still ticking over and should continue to do so as long as there’s no need to slam the breaks back on.”

Danni Hewson
Financial Analyst

Danni spent more than 19 years at the BBC, presenting and reporting on business news across a variety of programmes – including BBC Breakfast, BBC News Channel, BBC Look North and latterly Radio 5 Live’s flagship business programme ‘Wake up to Money’. She is now responsible for producing analysis and commentary across a broad range of subjects at AJ Bell, from financial markets, to economics and personal finance.

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