The UK economy returned to growth in February despite pressure from continuing government Covid restrictions, as businesses adapted to lockdown and EU exports staged a partial recovery.
The Office for National Statistics said gross domestic product (GDP) rose by 0.4% in February from a month earlier as the economy showed some signs of improvement after a revised drop of 2.2% in January.
Despite the toughest lockdown measures since the first wave of the virus remaining in place, retailers recorded a pickup in sales, while growth in car production fuelled a rise in manufacturing activity after a poor January and construction grew strongly.
However, the economy remains 7.8% smaller than in February 2020 before the pandemic struck.
Economists said the improved performance came as businesses and households adapted to restrictions and started making preparations for controls to be relaxed after the government announced its roadmap for exiting lockdown.
Suren Thiru, the head of economics at the British Chambers of Commerce, said the easing of pandemic measures over the coming months, alongside rapid progress in the vaccine programme, would help to release further pent-up demand. “However, hope of a sustained consumer-led revival may prove too optimistic as the economic scarring caused by Covid may trigger a renewed reluctance to spend as government support winds down,” he said.
UK exports of goods to the EU recovered after a record plunge during January in the first month since Brexit, rising by £3.7bn, or 46.6% on the month as businesses started to adapt to the new relationship and after a pause in deliveries a month earlier due to the Covid lockdown and fears over Brexit border disruption.
The ONS said the increase in exports was driven by machinery and transport equipment and chemicals, particularly cars and medicinal and pharmaceutical products.
However, EU exports remained about 11% below levels a year earlier, reflecting the continuing impact of border friction since leaving and disruption caused by Covid.
The bounce-back followed unusually low volumes in January after companies stockpiled goods in December before the Brexit deadline and held back from sending shipments at the start of the new trading relationship. It also comes as the toughest Covid restrictions since the first wave of the pandemic in both the UK and the EU led to reduced demand for goods and services.
Increased exports of goods in February were largely recorded in machinery and transport equipment, and chemicals to the EU. The monthly export of cars returned close to similar levels a year ago, while chemicals exports were driven by a rise in shipments of medicinal and pharmaceutical products to Belgium, where large volumes of Covid vaccines are produced.
Exports of food and live animals to the EU rose by £300m, about 77%, in February after significant disruption during the first month since Brexit. Exports of fish and shellfish – one of the worst-affected areas due to their short shelf life – recovered, although they remain below levels recorded a year ago.
The latest snapshot for the economy suggests the UK could stage a faster recovery this year than first anticipated, driven by a bounce-back in business activity and consumer spending as restrictions are relaxed.
Some sectors are expected to take longer to recover than others, while risks remain from new Covid variants. While hospitality was down by more than 50% in February on a year earlier, and the arts by more than a third, the manufacturing and construction sectors were only 4% smaller.
Rory Macqueen, the principal economist at the National Institute of Economic and Social Research, said: “If the vaccine programme and lifting of restrictions continue on schedule this provides a firm basis for continuing growth in the second quarter and 2021 overall.”
