UK economy grew by 2.1% in August thanks to Eat Out to Help Out but recovery was less than half predicted
THE UK economy grew by 2.1% in August thanks to the Eat Out to Help Out scheme but the pace of recovery slowed.
The GDP rise is the fourth consecutive monthly increase after the economy crashed during the peak of the coronavirus crisis.
But it's less than half of what experts had expected, and a major slowdown since July, the figures by the Office for National Statistics (ONS) show.
Analysts expected that GDP would increase by 4.6%, according to a survey by Pantheon Macroeconomics.
In July, GDP was up by 6.4%, and in June it rose by 9.1%, according to ONS data.
GDP for August was 21.7% higher than its April low, when the economy crashed 19.5%, but it still remains 9.2% below February's level.
What this means for your personal finances
GROSS domestic product (GDP) is one of the main indicators used to measure the performance of a country's economy.
When GDP goes up, the economy is generally thought to be doing well although today's figures aren't as strong as hoped.
Negative growth often brings with it falling incomes, job cuts and lower consumption.
The Bank of England (BoE) uses GDP as one of the key indicators when it sets the base interest rate.
This decides how much it will charge banks to lend them money, and is a way to try to control inflation and the economy.
So, for example, if prices are rising too fast, the BoE could increase that rate to try to slow the economy down. But it might hold off if GDP growth is slow.
The BoE cut interest rates twice in March due to coronavirus.
Base rate cuts means mortgage borrowers now typically benefit from lower rates, but at the other end of the scale savers earn less on their savings.
To measure GDP, the Office for National Statistics (ONS) collects data from thousands of UK companies.
Andrew Wishart, UK economist at Capital Economics, told The Sun the full impact of the crisis on jobs and businesses will only become apparent once the government starts to withdraw its support.
The research firm expects unemployment to double from 4 per cent to 8 per cent, with the same number of companies likely to go bust.
The monthly GDP growth rate is volatile though, and estimates are currently subject to more uncertainty than usual due to the pandemic.
The accommodation and food services sub-sector boosted GDP in August, as the combined impact of the easing of lockdown rules, the Eat Out to Help Out scheme, and people choosing summer staycations, the ONS said.
The Eat Out to Help Out scheme gave diners 50% off restaurant meals in August, with up to a maximum of £10 per person.
Following the release of the GDP data this morning, the pound dipped slightly against the euro but it has since recovered.
The figures come after the UK plunged into its worst ever recession last month, following a quarterly GDP drop of 20.4%.
It was the first time in 11 years that the UK tipped into a recession.
Economists consider two consecutive three-month periods where GDP falls as the technical definition of a recession.
Although GDP rose month-on-month in August and by 8% in the three months to August, the UK is still in a recession given its two previous consecutive quarterly falls.
UK unemployment has so far risen by 730,000 workers since March after another 114,000 Brits lost their jobs in July.
Around 220,000 workers lost their jobs in the quarter between April and June, which is the largest quarterly drop since 2009.
In July, the Office for Budget Responsibility (OBR) predicted unemployment could treble this year to 3million, up from 1.3million in 2019.
The OBR said the true number of job losses depends on what companies do when the furlough scheme ends in October.
How to recession proof your finances
IF you're worried about the recession hitting your finances then we explain how to protect yourself.
CHECK YOUR FINANCES Take a look at where you can cut costs. Are there any subscriptions you could cancel? Could you haggle down a bill? Reassess your finances and work out where to save cash and then save this money into a rainy day fund.
PAY OFF YOUR DEBTS Make sure you're repaying priority debts and if you're struggling speak to your lender. Use a tool such as to check which cards and loans you're likely to be accepted for without it hurting your credit score. You can get FREE debt advice from places like Citizens Advice and StepChange.
DIVERSIFY YOUR PENSIONS AND INVESTMENTS If you've got a pension or investments make sure your pots are well diversified. Being overexposed to one asset class or one particular company could put your savings at risk if something goes wrong.
Experts have hoped for a V-shaped economic recovery, but these hopes initially faded in July as the UK economy grew just 2.4 per cent in May.
Meanwhile, mortgage approvals surged in July following lockdown, showing a V-shaped recovery for the housing market.
Jonathan Athow, ONS deputy national statistician for economic statistics, said: "The economy continued to recover in August but by less than in recent months.
"There was strong growth in restaurants and accommodation due to the easing of lockdown rules, the Eat Out To Help Out scheme, and people choosing summer 'staycations'.
He added: "However, many other parts of the service sector recorded muted growth.
"There was limited growth in manufacturing, which remains down on its pre-pandemic level, with car and aircraft production still much lower than the start of the year."
Tom Stevenson, investment director of Fidelity International, added: "While there are positive indications from the Bank of England of growth returning to pre pandemic levels before Christmas, this is far from a done deal.
"The furlough scheme comes to an end this month and there is a real danger that fear of unemployment triggers a negative feedback loop of precautionary saving and dampens consumer confidence.
"Covid-19 cases are rising quickly in some parts of the country, with further localised lockdowns expected to be announced on Monday.
"This will undoubtedly hit output as the country braces itself for a long, difficult winter.";
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And Suren Thiru, head of economics at the British Chambers of Commerce (BCC), added: "The sharp slowdown in growth indicates that the recovery may be running out of steam, with output still well below pre-crisis levels.
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"The increase in activity in August largely reflects a temporary boost from the economy reopening and government stimulus, rather than proof of a sustained ‘V’-shaped recovery.
“Although the UK remains on course to exit recession in the third quarter, the looming triple threat of surging unemployment and further restrictions means the recent rally in economic output is likely to be short-lived."