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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Pubs reopen doors in Stockton-on-Tees
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.”
The cyber attack on Jaguar Land Rover (JLR), which halted production for nearly six weeks at its sites, cost the company roughly £200m, it has been revealed.
Latest accounts released on Friday showed “cyber-related costs” were £196m, which does not include the fall in sales.
Profits took a nose dive, falling from nearly £400m (£398m) a year ago to a loss of £485m in the three months to the end of September.
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Revenues dropped nearly 25% and the effects may continue as the manufacturing halt could slow sales in the final three months of the year, executives said.
The impact of the shutdown also hit factories across the car-making supply chain.
Slowing the UK economy
The production pause was a large contributor to a contraction in UK economic growth in September, official figures showed.
Had car output not fallen 28.6%, the UK economy would have grown by 0.1% during the month. Instead, it fell by 0.1%.
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Reacting to JLR’s impact on the GDP contraction, its chief financial officer, Richard Molyneux, said it was “interesting to hear” and it “goes to reinforce” that JLR is really important in the UK economy.
The company, he said, is the “biggest exporter of goods in the entire country” and the effect on GDP “is a reflection of the success JLR has had in past years”.
Recovery
The company said operations were “pretty much back running as normal” and plants were “at or approaching capacity”.
Production of all luxury vehicles resumed.
Investigations are underway into the attack, with law enforcement in “many jurisdictions” involved, the company said.
When asked about the cause of the hack and the hackers, JLR said it was not in a position to answer questions due to the live investigation.
A run of attacks
The manufacturer was just one of a number of major companies to be seriously impacted by cyber criminals in recent months.
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High street retailer Marks and Spencer estimated the cost of its IT outage was roughly £136m. The sum only covers the cost of immediate incident systems response and recovery, as well as specialist legal and professional services support.
The Co-Op and Harrods also suffered service disruption caused by cyber attacks.
Four people were arrested by police investigating the incidents.
Sir Keir Starmer and Rachel Reeves have scrapped plans to break their manifesto pledge and raise income tax rates in a massive U-turn less than two weeks from the budget.
The decision, first reported in the Financial Times, comes after a bruising few days which has brought about a change of heart in Downing Street.
Read more: How No 10 plunged itself into crisis
I understand Downing Street has backed down amid fears about the backlash from disgruntled MPs and voters.
The Treasury and Number 10 declined to comment.
The decision is a massive about-turn. In a news conference last week, the chancellor appeared to pave the way for manifesto-breaking tax rises in the budget on 26 November.
She spoke of difficult choices and insisted she could neither increase borrowing nor cut spending in order to stabilise the economy, telling the public “everyone has to play their part”.
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‘Aren’t you making a mockery of voters?’
The decision to backtrack was communicated to the Office for Budget Responsibility on Wednesday in a submission of “major measures”, according to the Financial Times.
The chancellor will now have to fill an estimated £30bn black hole with a series of narrower tax-raising measures and is also expected to freeze income tax thresholds for another two years beyond 2028, which should raise about £8bn.
Tory shadow business secretary Andrew Griffith said: “We’ve had the longest ever run-up to a budget, damaging the economy with uncertainty, and yet – with just days to go – it is clear there is chaos in No 10 and No 11.”
How did we get here?
For weeks, the government has been working up options to break the manifesto pledge not to raise income tax, national insurance or VAT on working people.
I was told only this week the option being worked up was to do a combination of tax rises and action on the two-child benefit cap in order for the prime minister to be able to argue that in breaking his manifesto pledges, he is trying his hardest to protect the poorest in society and those “working people” he has spoken of so endlessly.
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Ed Conway on the chancellor’s options
But days ago, officials and ministers were working on a proposal to lift the basic rate of income tax – perhaps by 2p – and then simultaneously cut national insurance contributions for those on the basic rate of income tax (those who earn up to £50,000 a year).
That way the chancellor can raise several billion in tax from those with the “broadest shoulders” – higher-rate taxpayers and pensioners or landlords, while also trying to protect “working people” earning salaries under £50,000 a year.
The chancellor was also going to take action on the two-child benefit cap in response to growing demand from the party to take action on child poverty. It is unclear whether those plans will now be shelved given the U-turn on income tax.
A rough week for the PM
The change of plan comes after the prime minister found himself engulfed in a leadership crisis after his allies warned rivals that he would fight any attempted post-budget coup.
It triggered a briefing war between Wes Streeting and anonymous Starmer allies attacking the health secretary as the chief traitor.
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The prime minister has since apologised to Mr Streeting, who I am told does not want to press for sackings in No 10 in the wake of the briefings against him.
But the saga has further damaged Sir Keir and increased concerns among MPs about his suitability to lead Labour into the next general election.
Insiders clearly concluded that the ill mood in the party, coupled with the recent hits to the PM’s political capital, makes manifesto-breaking tax rises simply too risky right now.
But it also adds to a sense of chaos, given the chancellor publicly pitch-rolled tax rises in last week’s news conference.
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