UK GDP rose by 4.8% year on year in Q2, according to figures released today by the Office of National Statistics.
The pattern of growth was erratic, with a 2.2% burst of growth in April slowing sharply to just 0.6% in May before accelerating once more to +1.0% in June.
Fears that the arrival of the Delta variant and the “Pingdemic” that followed might impact growth have so far not really materialised. Overall, the figures were in line or slightly ahead of most forecasters’ expectations, but not quite matching the Bank of England’s 5.0% forecast made last week.
The pattern of growth was driven by the reopening of the economy after lockdown. Consumer expenditure jumped by 7.3%, more than offsetting the weakness of the previous two quarters.
Businesses have yet to restart investing, with capital spending slipping back half a percent.
Wage growth remains sluggish, despite many reports of hard to fill vacancies, with the ONS reporting employee compensation just 1.7% ahead.
Looking at the data, Steve Clayton, fund manager at Hargreaves Lansdown Select said:
“These figures knock fears over the impact of the Delta variant on the head. Consumers are continuing to spend, regardless.”
“The economy is still some 4.4% smaller than it was at the end of 2019, but is clawing that back with each month. With the big surge of the initial reopening behind us, we expect the pace of growth to moderate over the remainder of the year.”
“But if businesses pick up the baton and start investing to support growth once more, then we could see upside to our already positive view of the prospects for the UK economy this year.”
Commenting on UK GDP showing a positive uptick and an encouraging economic outlook, Douglas Grant, Director of Conister, part of AIM listed Manx Financial Group, said:
“Today’s UK GDP data shows a positive uptick quarter on quarter and provides a more encouraging outlook for the UK economy going forward.”
“However, the plight of UK small businesses and current default levels caused by the ongoing impact of the pandemic should be of real concern.”
“We must acknowledge that the UK’s business debt burden has ballooned to unprecedented levels and unfortunately this has already created a relentless flow of weak zombie-like companies falling off a loan default cliff.”
“It is imperative that we support sectors and businesses that are strong and nimble enough to adapt to the new economy and therefore continue contributing to its growth.”
“We also believe that the introduction of the Recovery Loan Scheme will act as second support system for those businesses currently struggling but with long term growth potential.”
“Indeed, we have been pleased to see the Government look beyond the obviously more resilient business sectors and introduce the RLS which can support those businesses that have been mostly negatively impacted by Covid-19, such as the hospitality and leisure sectors.”
“Conister will continue to do all it can, working alongside the Government and traditional lenders, to support businesses.”
“At Conister we have delivered upon all of our initial objectives.”
“We have lent our full CBILS and BBLS allocation and have applications which we hope can be accredited under the RLS.”
“We will focus on lending this to robust businesses in all sectors that we believe will thrive in the future. Conister will continue to do all it can, working alongside the Government and traditional lenders, to support British businesses.”
Commenting on quarter on quarter GDP rising 4.8%, Ian Warwick, Managing Partner at Deepbridge Capital, said:
“Although expected with the economy reopening, today’s GDP data is the latest sign of positive growth for the economy.”
“As we continue to focus on economic recovery, it remains critically important that scale-up businesses, particularly in high-growth sectors such as digital technologies and life sciences are supported; as they will be at the very heart of economic growth as we create an economy fit for the twenty-first century.”
“Government initiatives such as the Enterprise Investment Scheme (EIS) have never been more important for helping entrepreneurs and innovators source the funding they require, whilst also offering private investors with tax incentives to develop UK-supporting private equity portfolios.”
“With our EIS funds reaching record levels of funding in 2020/21 it is evident that there is considerable demand from investors and financial advisers alike to invest in early-stage UK companies which we believe will be at the forefront of our economic recovery.”