Sunak hails ‘promising sign’ as April reopening sees fastest GDP growth since last summer
Britain’s economy grew by 2.3% in April as the high street and hospitality sector reopened, official figures show.
That meant that GDP was a record 27.6% larger compared with the same month last year when the nation was in the grip of the first coronavirus lockdown.
Chancellor Rishi Sunak hailed it as a “promising sign that our economy is beginning to recover”.
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The chancellor acknowledged that workers continued to need support
The data from the Office for National Statistics (ONS) covers a period when non-essential retail as well as outdoor drinking and dining were allowed to resume – on 12 April.
It followed a subdued start to the year when latest lockdown measures had sent the economy into reverse gear.
The ONS said that April’s monthly growth was the fastest since July last year, when businesses were reopening after the initial period of coronavirus restrictions.
But it still left gross domestic product (GDP) 3.7% below its pre-pandemic peak of February 2020.
Jonathan Athow, ONS deputy national statistician for economic statistics, said GDP was boosted by strong growth in retail spending as well as schools – which had returned in March – being open for the full month, and the start of the reopening of the hospitality sector.
There was also an increase in car and caravan sales as well as negative one-off factors such as car plant shutdowns and oil field maintenance.
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Meanwhile, trade friction following the end of the Brexit transition period continued to have an impact.
“Exports of goods have now, broadly, recovered from the disruptions seen at the beginning of the year,” Mr Athow said.
“However, imports of goods from the EU are still significantly down on 2020 levels.”
Monthly imports from non-EU countries were the highest since records began in January 1997, the ONS said.
The chancellor said: “Today’s figures are a promising sign that our economy is beginning to recover.”
But he added that, while a million people had come off furlough across March and April, many workers still required continued support.
The COVID-19 pandemic resulted in GDP shrinking by nearly 10% in 2020, the biggest collapse in 300 years.
Forecasters predict that as Britain emerges from the crisis it will see a consumer-led bounce back with the fastest pace of growth since the Second World War.
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But there are fears that a delay to the 21 June date for the end of lockdown measures could hold back the recovery.
UK GDP shrank by 1.5% in the first quarter though on a monthly basis the economy has been recovering ever since a 2.5% contraction in January, posting growth of 0.7% in February and 2.1% in March.
April’s growth figure was broadly in line with economists’ expectations.
Thomas Pugh, UK economist at Capital Economics, said: “The jump in GDP in April was another sign that consumers are raring to spend as the economy reopens.
“GDP is on track to return to its February level before the end of the year.
“If anything, the economy could regain its pre-crisis level even sooner.”
Business
Vivergo: How US-UK trade deal could bring about collapse of huge renewable energy plant in Hull
The smell of yeast still hangs in the air at the Vivergo plant in Hull but the machines have fallen quiet.
More than 100 lorries usually pass through here each day, carrying 3,000 tonnes of wheat. It is milled, fermented and distilled. The final product is bioethanol, a renewable fuel that is then blended into E10 petrol.
This is a vast operation. It took several years to build, with considerable investment, but it is on the verge of closing down. Management and staff are holding out for a last-minute reprieve from the government but time is running out.
It’s been a turbulent journey. The plant was already being annihilated by US rivals, losing about £3m a month. Vivergo and Ensus, based in Teesside, blamed regulations that enable US companies to earn double subsidies.
They were pushing for regulatory change but then a killer blow: The US-UK trade deal, which allows 1.4 billion litres of American ethanol into the UK tariff-free (down from 19%).
“We’ve effectively given the whole of the UK market to the US producers,” said Ben Hackett, managing director at Vivergo.
“If we were to have the same support that the US industry has, if we could use genetically modified crops, we wouldn’t need that tariff. We would be able to compete. If we had the same energy costs. We wouldn’t need those tariffs.”
The government has the weekend to come up with a plan that could keep the business running. If it fails, Vivergo will begin issuing redundancy notices to its 160 staff.
Ben Hackett
It’s a devastating prospect for workers, many of them live in Hull and are nervous about alternative opportunities in the area.
Mike Walsh, a logistics manager who has been working at the plant for 14 years, said: “It’s not a great place to be at the moment. It’s a very well paid, very high-skilled role and they’ve (Vivergo) given everybody an opportunity in an area that doesn’t pay that well…. The jobs market isn’t as good as what people would like. So it does impact the local economy.”
He called on the government to “help us, save us, give this industry a future”.
His colleague Claire Wood, lead productions engineer, said: “I moved here after a career in oil and gas for 10 years, partly because I want to be part of the transition to renewable fuels. I can see so much potential here and it’s absolutely devastating to know that this place might be closed very, very shortly and that all that potential just goes away.”
Thousands more could be affected. Haulage companies may have to lay off truck drivers and farmers could also suffer a blow.
Vivergo makes bioethanol using wheat. That wheat is bought from farms from Yorkshire and Lincolnshire.
Claire Wood
The National Farmers Union has sounded the alarm, saying: “Biofuels are extremely important for the crops sector, and their domestic demand of up to two million tonnes can be very important to balance supply and demand and to produce up to one million tonnes of animal feed as a by-product.”
Another bioproduct is carbon dioxide. The gas can be captured and used to put the fizz in drinks or injected into packaging to preserve food.
If Vivergo and Ensus were to go, Britain would lose as much as 80% of its output of carbon dioxide. Supplies are already tight across Europe, meaning this decision could compound shortages across a range of sectors, from meat-packing to healthcare.
The industry is calling on the government to help. Vivergo says it needs temporary financial support but that the government must create a regulatory and commercial environment in which it can thrive.
It says rules that award double subsidies to companies that use waste product in their bioethanol must be changed. At present, these rules are being used by US companies that make ethanol from Uldr – a by-product of processing corn. They argue this is not a genuine waste product.
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Another option is to grow the market. Industry leaders are calling on ministers to increase the mandated renewable fuel content in petrol from 10% to 15% and for an expansion into aviation fuels. That would allow British companies to carve out a space.
The government has been locked in talks with the company since June.
It said: “We will continue to take proactive steps to address the long-standing challenges it faces and remain committed to a way forward that protects supply chains, jobs and livelihoods.”
However, the time for talking is almost over.
Mr Hackett said he had no idea how the government would respond but he was firm with his stance, saying: “In times of global uncertainty, losing that energy certainty and supply from the UK is a problem.
“I think what they’re missing out on is the future growth agenda. We’re the foundation on which the green industrial strategy can be built. We make bioethanol that today decarbonises transport. Tomorrow it will decarbonise marine. It will decarbonise aviation.”
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