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UK economic rebound slows sharply as supplies hit

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LONDON: Britain's economy grew 1.3 per cent in the third quarter, a far slower pace than the previous three months, as global supply chain blockages hit businesses hard, official data showed Thursday. Gross domestic product growth for the July-September period compared with the output of 5.5 per cent in the second quarter, the Office for National Statistics (ONS) said in a statement. "As the world reopens we know that there are still challenges to overcome," finance minister Rishi Sunak said in response. Despite the sharp growth slowdown in the third quarter, the chancellor of the exchequer added that the UK was "forecast to have the fastest growth in the G7 this year". The ONS added that the UK economy was still 2.1 per cent below its level before the outbreak of the coronavirus pandemic at the end of 2019. The economy contracted 0.2 per cent in July before rebounding in August and September, it said. ONS chief economist Grant Fitzner said "business investment remained well down on pre-pandemic levels" in the third quarter. He added that the trade deficit widened as exports of goods to countries outside the European Union fell and imports, particularly of fuel, increased. As countries reopen from pandemic lockdowns, companies are struggling to meet the demand for goods and services, sending inflation soaring. "A combination of rising Covid cases and shortages of raw materials, components and labour came together to present significant headwinds to growth," Alpesh Paleja, lead economist at Britain's main business lobby group the CBI said following Thursday's data. "It's encouraging that the economy maintained some momentum in September but there's no denying that this rounded off a tough quarter for businesses, with supply constraints biting hard," he added. - 'Much tougher phase' - The Bank of England last week forecast that the UK economy would grow 7.0 per cent this year after the nation emerged from pandemic lockdowns. However, it estimates that growth would then slow to 5.0 per cent next year. "With the easy gains from reopening the economy exhausted and policy support being withdrawn, the recovery has entered a much tougher phase," noted Martin Beck, senior economic advisor to financial researchers at the EY ITEM Club. "In addition, the situation has been made harder by the escalation of supply chain disruption and the increases in inflation, which will eat into household spending power." Brexit is meanwhile set to hit Britain's economic growth more than the coronavirus pandemic in the long term, the head of a UK government body advising on the financial outlook, said last week. "In the long term it is the case that Brexit has a bigger impact than the pandemic," said chairman of the Office for Budget Responsibility, Richard Hughes. Britain formally departed the EU at the start of the year, contributing to current supply disruptions.