The UK economy grew by just 0.1% in July as a result of ongoing disruption caused by Covid-19, according to the latest figures from the Office for National Statistics (ONS). It leaves the economy still 2.1% below its pre-pandemic level in February 2020.
A key theme from firms was the impact of staff shortages due to employees having to self-isolate: In a separate release, the ONS said: “There was a substantial rise in anecdotal evidence from businesses that customers had cancelled appointments at short notice, or that their staff or the staff of other businesses they wished to buy products from had been required to self-isolate because of coronavirus (Covid-19).
“The problems seemed to be more consequential in the service sector, with hairdressers in the personal service activities industry being particularly affected.”
Business struggling with shortage of labour and microchips
The ONS also revealed that companies faced ongoing supply chain problems, due to a shortage of lorry drivers available to deliver goods. Moreover, businesses also experienced continuing issues obtaining raw materials and components, such as microchips.
“For some time, we have reported that the automotive industry has struggled to source microchips,” said the ONS, adding that it had observed this problem in June and noted its effect on businesses involved in the wholesale and retail of new and used cars.
However, the microchip shortage has now begun to spread to other sectors. “Other industries have also reported that difficulties in sourcing microchips have led to them producing less. These industries include the manufacture of machinery and equipment, the manufacture of plastic products, telecoms activities and computer programming,” said the ONS.
Production output boosted by oil
The ONS also reported that production output increased by 1.2% in July 2021. This was the main contributor to growth in gross domestic product (GDP), boosted by the reopening of an oil field production site that was temporarily closed for planned maintenance.
Meanwhile, construction contracted for a fourth consecutive month, with output down by 1.6% in July – now 1.8% below its pre-pandemic level in February last year. The sector was initially affected the most by the coronavirus pandemic before recovering strongly. “While construction has fallen for the past four months, it is still performing more strongly than the Index of Services and Index of Production compared with February 2020 levels,” said the ONS.
Services output was broadly flat in July and remained 2.1% below its pre-pandemic level.
Recreation sector enjoys 9% growth
There was some good news for the arts, entertainment and recreation sector as activities grew by 9%, boosted by sports clubs, amusement parks and festivals as restrictions started to ease. However, it too remained below its pre-coronavirus pandemic level by 18.8%.
Output in consumer-facing services fell by 0.3%, which was its first fall since January this year, mainly as a result of a 2.5% fall in retail sales.