New figures show that since England opened back up in July, the growth of the UK economy has actually slowed down. Here’s what’s going on right now and what this lack of economic growth could mean for you and your finances.
What is going on with the UK economy?
According to the ONS, economic growth in the UK is slowing down. Statistics from July show that the economy grew by just 0.1%. This compares poorly to a much more weighty growth of 1% the month before.
Although there have now been six consecutive months of economic growth in the UK, GDP is still down by 2.1% compared to pre-pandemic levels.
The reopening of England has helped to boost the UK economy. Arts, entertainment and recreational activities grew by a solid 9% during July. However, the main contributor to growth was actually a 1.2% rise in production output. This was partly due to oil and gas facilities opening up after being shut for summer maintenance.
Why is the growth of the economy slowing?
Some are attributing this slowing growth to the recent ‘pingdemic‘ across the country that forced many people to self-isolate. Surging covid cases and the fact that so many were isolating across the nation stifled the big reopening boom that many were expecting.
As a result of the pingdemic, many businesses struggled with fewer members of staff available. And countries like Wales, Scotland and Northern Ireland still have a lot of restrictive measures in place.
What might the slowing of the UK economy mean for your finances?
Economic growth figures don’t give us a total picture, and slower growth isn’t necessarily a bad thing. Here’s how this news could affect your finances:
- Savers – a slow-growing economy can reduce the chances of inflation running rampant. This could actually end up protecting the purchasing power of your savings.
- Investors – slower growth could lead to more stable share prices, which might mean lower immediate returns. But for those who invest regularly, it provides an opportunity to buy shares at cheaper prices. The UK share market is still one of the best in the world in terms of value right now.
- Business owners – the economic comeback might not have been what you were hoping for. But there is still a lot of room to grow before we’re back to normal. Growth in July was slow, but less self-isolation, more international travel and fewer restrictions should lead to an uptick in business.
Should you worry about slowing growth in the UK?
A slower rate of growth in the UK economy is nothing to fear. Things have been very turbulent since the start of the coronavirus pandemic and this is skewing a lot of the data.
We keep seeing restrictions lead to things like pent-up demand and production limitations. This bottling and releasing of purchasing pressure can then cause an unrealistic boom in growth figures or sometimes supply issues for companies.
Life in the UK isn’t back to normal just yet. Economic growth looks like it’s levelling off, which may keep a cap on inflation and rising prices. There is still plenty of runway for more growth. It might even be better that it comes in gradually, rather than in one big bang.