Growth is up, said Rishi Sunak in his budget speech last month, but the figures for the third-quarter show this claim is no longer true.
The rise in national income, or GDP, of 1.3% in the three months to September was down from 5.5% in the previous quarter. It meant the recovery from the worst slump in 300 years slowed over the summer and in a troubling development, is now on a much lower trajectory.
It must worry the chancellor, less than a month on from his upbeat declarations in the budget, that the pace of growth has slowed dramatically and that one of his other measures of success, namely how well the country is doing in relation to its G7 counterparts, puts the UK at the bottom of the league.
All the major economies have recovered more quickly than the UK economy, which remains 2.1% below its pre-pandemic peak.
Germany and Italy are 1.5% and 1.4% below their pre-pandemic best while the US has jumped ahead to be in positive territory by 1.4%.
Our closest neighbour, France, which looks and feels economically most like the UK, is only 0.1% below where it was before Covid-19 forced governments to impose wide ranging lockdowns.
Our European neighbours keep more in reserve to cope with the bad times, preventing a deep slump when a financial disaster strikes. The US government, just as it did in the financial crash of 2008, allows the slump to wipe out businesses and jobs, but then does so much more to turn the situation around.
Sunak said he had a plan for growth “that builds a stronger economy for the future”. At the time it sounded presumptive, given the puny support for the economy from his various tax and spending measures. Today that statement is likely to ring distinctly hollow among businesses in the manufacturing and construction sectors where growth slipped backwards in the third quarter.
Short-time working in the car industry and the mothballing of construction projects outside the excessively profitable housebuilding sector have left these two bedrock industries struggling.
During the quarter the manufacturing sector contracted by 0.3%. Construction slumped by an even sharper 1.5%.
Another quarter dominated by a lack of skilled staff and a shortage of vital materials and components to work with, and both sectors will likely contract for a second successive quarter in the final three months of 2021, fulfilling the definition of a recession for each one.
The Conservative narrative is that there is not much Sunak can do to help employers fill vacancies in the short term. Nor can he manipulate the global trading system to ease bottlenecks.
That would be true without Brexit. The government’s adoption of the hardest of Brexits has cut the supply lines of skilled staff that would have eased the manufacturing and construction industries through the pandemic.
A hard Brexit has also persuaded many of our European trading partners to turn away from Britain. This can be seen in the quarterly trade figures, which are so bad they drag on growth.
Ana Boata, head of economic research at the credit insurer Euler Hermes, said trade barriers would almost certainly push the UK’s manufacturing recession.
The lack of goods coming into the country would also contribute to higher inflation, which the Bank of England says will reach 5% by next spring, she said.
It is reasonable for voters to ask why the government is battling the EU over article 16, risking a trade war with the most important destination for our goods and services, when the UK’s industrial base is contracting and households are staring at a year of falling living standards.
At the moment the government shows no sign of budging.
For Latest Updates Follow us on Google News
**If you have any Query Related This Post then here is the Source Link**