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UK Economy experiences growth of 0.4% in February


The UK economy experienced a growth of 0.4% in February as services and other industries slowly prepare to ramp up output in preparation for the 12th of April.


Despite the 0.4% increase in Real GDP, the UK economy is still below by 7.8% compared to last years level.


The increase in Real GDP was largely due to increased economic activity from the services sector, where there was a rise of 0.2%, however, this remains 8.8% below February 2020’s level.


The increase in output from these service industries is due to their anticipation towards the 12th of April, where lockdown restrictions will be eased in England and other UK countries except for Scotland.


The service sectors are primarily cash in hand businesses, they have little to no revenue streams during lockdowns as they are reliant on consumers entering their business premises.


Because of this, these firms have been starved of cash flow during the pandemic, so, they are eager to reopen and recoup their losses, showing why there has been an increase in activity from this sector in particular.


Additionally, activity from production, manufacturing and construction grew by 1.0%, 1.3% and 1.6% respectively, however, each area is still below last years levels.


The increase in activity from these sectors correlates with the boost from the service industry, and, this boost in these three sectors is likely attributed to increased demand for their services and confidence.


Because of the government roadmap, the confidence of economic agents across the country has increased, this is because the roadmap provides forward guidance, meaning agents know what to expect.


This reduces the number of unknowns that economic agents have to deal with thus increasing confidence.


Additionally, the increasing public health efforts also contribute towards this increasing confidence as the threat of COVID is being decreased as vaccinations ramp up.


Consequently, businesses and firms are preparing for the opening of the economy, because of this, manufacturing, production and construction firms have seen increased demand for their services as businesses revamp their services in anticipation of the wave of demand once the economy opens up.


The total trade deficit of the UK has also slightly narrowed by £2.1 billion to £6.3 billion, reducing the difference between the amount of money leaving and entering the economy.


So, confidence has been the main driving factor of why this economic activity has increased, businesses are confident that on the 12th of April, they will see a massive surge in demand for their goods and services, especially firms in retail and service sectors.


Thus, to accommodate this increase in demand, firms have increased output to prepare for the wave of consumer spending, showing why the UK economy has experienced slow levels of growth in February.

 

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