UK economy recovers slower than hoped: What this means for British businesses

Many people had hoped that once the restrictions in the UK lifted, the economy would bounce back from its decline. However, recent data has revealed the UK’s economy grew just 1.8% in May, far from what the economists had hoped.

Economic recovery is happening, but slowly

At the beginning of the year, the UK government imposed lockdown measures to contain the spread of the coronavirus. These measures ended up stalling the economy since most businesses had to close temporarily or operate at a limited capacity. Experts are still not sure as to how the UK would recover with the Office for National Statistics reporting that many businesses have had no turnover even though they began trading again in June.

Consumer confidence is a major hurdle

According to BBC, economists had predicted the economy would expand by 5% in May with the ease of lockdown restrictions. As a result, the 1.8% increase has disappointed many economists, who were hoping to see economic activity rapidly picking up as businesses reopened their doors.

That is not all. The UK economy registered 24.5% smaller than it did in February, and from the start of the lockdown from March to May, the country’s GDP shrunk by 19.1%. Even during the 2008 recession, the  shrank no more than 2.1% in a quarter. 

The road to recovery may not be as simple as many initially hoped it to be. It is more than a matter of allowing businesses to reopen, but also for customers to shop like they were before the lockdown. However, with job losses and increasing economic uncertainty, many consumers are still hesitant to spend a lot of money.

What is a realistic outlook for the UK economy?

Businesses have been under a lot of strain since March, but as restrictions eased, many had hoped that operations would be able to return somewhat back to normal. But, given May’s disappointing growth, is it realistic to expect businesses to bounce back?

The biggest hurdle will be ensuring customers feel safe and can spend again, which will depend on multiple factors such as employment and the nature of the pandemic. It is also important to note that not all sectors are impacted equally, and sectors such as manufacturing, construction, and housing all reported strong signs of recovery in May. 

Historically, it has taken economies long periods to recover from a major decline. Because the UK’s economic downturn was self-inflicted, many believed in a rapid recovery once businesses were allowed to reopen. However, the current situation seems to be much more complicated. 

More data collected over the coming months will give a clearer image of how the economy is recovering and how long it will take for the UK to regain its economic status before the pandemic. 

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